Senior Citizen's Guide digital books
Senior Citizen's Guide to Baltimore

Reverse Mortgage Myths

Although reverse mortgages continue to grow in popularity, there is a lot of misinformation and myths about these unique loans. A reverse mortgage is a home equity loan, which allows homeowners 62 years or older to convert some of their home equity into tax-free income without having to make any repayments on any part of the loan as long as they continue living in the home. The tax-free proceeds from a reverse mortgage can be used for any purpose such as paying for home health care or medical expenses, paying off an existing mortgage or credit card debt, having extra monthly income, or simply having extra cash to enjoy life a bit more.

MYTH 1: The bank will own my home.

FACT: A homeowner will continue to own their home throughout the life of their reverse mortgage. The title always stays in their name and the homeowner can sell their home at any time.

MYTH 2: I can lose my home.

FACT: With a reverse mortgage the homeowner can never be foreclosed upon for failure to make monthly mortgage payments because no monthly mortgage payments are required.

MYTH 3: In order to get a reverse mortgage, there can't be any existing mortgages/liens on the property.

FACT: As long as there is enough equity in the home to pay off any existing mortgages or liens, a homeowner who is at least 62 years old may qualify for a reverse mortgage.

MYTH 4: When the loan becomes due, the bank will sell my home.

FACT: The homeowner will always retain title to their home. The loan becomes due when all homeowners no longer live in the home. At that time, the homeowners or their heirs can either sell or refinance the reverse mortgage in order to repay the loan.

MYTH 5: A homeowner could end up owing more than their home is worth.

FACT: There are several safeguards for reverse mortgages, including a built-in insurance from the Federal Government. With this federal insurance, the total amount of debt that will have to be repaid if the home is sold can never be greater than the value of the home.

MYTH 6: Reverse mortgage proceeds can affect Social Security or Medicare benefits.

FACT: A reverse mortgage will generally not affect a homeowner's Social Security payment or Medicare benefit.

MYTH 7: There are restrictions on how the money can be used.

FACT: There are absolutely no restrictions on how the money from a reverse mortgage can be used. Many homeowners use the money to pay off an existing mortgage, pay for home health care expenses or have a cash cushion for an increased sense of financial security.

MYTH 8: The proceeds from a reverse mortgage are taxable.

FACT: The proceeds from a reverse mortgage are tax-free because homeowners are using the equity in their homes to pay themselves now.

MYTH 9: This is a program only for those in need.

FACT: A reverse mortgage is a wonderful financial planning tool, used by homeowners both rich and poor, as a way of improving their retirement years. There are many homeowners in million dollar plus homes using reverse mortgages as part of their financial plan.

MYTH 10: I must have a good income and good credit score in order to qualify.

FACT: There are no income, asset, credit score, or employment qualifications because there are no repayments due on any part of the loan as long as there is at least one homeowner living in the home. To qualify, a homeowner must be at least 62 years of age and live in the home as their primary residence.

Home    Featured Programs    Choose Local Area     Request Information
A JR Media Publication • www.jrmediallc.comSite Index