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Reverse Mortgage
Learn the Facts
Reverse Mortgage Loan
Myths Debunked
Since 2014, the federal government has added layers of consumer protections to the Home Equity Conversion Mortgage (HECM), or reverse mortgage.
Unfortunately, many people are unaware and believe outdated and inaccurate myths about reverse mortgages. We’re here to change that!
The Biggest Myth of All
The Top 10 Reverse Mortgage Myths and Facts
Myth 1: I won’t own my home after a reverse mortgage loan.
Fact: You would own the home exactly as you did before. You can renovate it, sell it or do anything you could before.
Myth 2. The bank could make me leave my home.
Fact: With a HECM, the Federal Housing Administration (FHA) ensures that no one can make you leave or sell your home. You just need to comply with the loan terms, which includes living in the home as your primary residence, paying taxes, insurance, and applicable association dues, and maintaining the home.
Myth 3. If my spouse in under the age of 62, they will lose the home when I pass away.
Fact: If your spouse is on the title of the home, they are fully protected and retain ownership exactly as they would without a reverse mortgage loan.
Myth 4. Reverse mortgage loans should only be used as a last resort.
Fact: While reverse mortgage loans can be a financial lifesaver for people in tough spots, they have become powerful tools to enhance retirement plans, fund a variety of investments, and purchase new properties.
Myth 5: Getting a reverse mortgage means I’d start from ground zero on monthly mortgage payments.
Fact: Reverse mortgage loans eliminate monthly mortgage payments. You only have to pay costs for the property that you already have to pay, like taxes, insurance, and home upkeep.
Myth 6. I want to move, so a reverse mortgage loan doesn’t apply to my situation.
Fact: You can purchase a new home with a reverse mortgage loan. In fact, it can increase your homebuying power up to 200% while preserving your nest egg. Many people use a reverse for purchase loan to buy properties that would otherwise be too expensive.
Myth 7: You must have your traditional mortgage fully paid off to get a reverse mortgage.
Fact: While you do need to have a significant amount of equity in your home for a reverse mortgage loan, you do not need to own it free and clear. In fact, eliminating monthly mortgage payments is the principal reason many people get a reverse mortgage loan.
Myth 8. My heirs could end up with a big debt if I get a reverse mortgage loan.
Fact: With a HECM, the sale of your home will satisfy the obligation of your reverse mortgage loan. The FHA HECM Mortgage Insurance Fund (a reserve paid for by reverse mortgage borrowers) will cover the difference if your home’s value is less than the outstanding balance on the reverse mortgage at the time of sale. No one will ever owe more than the home’s value.
Myth 9. The bank owns the home after I pass away.
Fact:
If the value of the home is less than the amount owed on the reverse mortgage, your heirs will have the first right to buy the house at 95% of the appraised value. If the loan balance is lower, they can choose to pay off the loan instead. If they want to sell they home, they get to keep any profits left over after the loan balance is settled.
Myth 10. I should wait as long as possible before I take out a reverse mortgage loan.
Fact: While it is true that the initial reverse mortgage loan payout is generally larger the older you are, getting a reverse mortgage loan earlier can end up being a much smarter retirement strategy. For example, the proceeds could be used to delay taking social security benefits, protect investments in down markets, fund comprehensive retirement plans, or establish a line of credit where unused funds are guaranteed to grow.
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Link to: The Process
The Process
Review the major steps you’ll need to follow when applying for a reverse mortgage.
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*This advertisement does not constitute tax advice. Please consult a tax advisor regarding your specific situation. The homeowner is still responsible for paying property taxes, homeowner’s insurance, applicable association dues, and for maintaining the property.