There are a lot of myths and facts out there about reverse mortgages. It can be hard to determine what is true about a reverse mortgage and what is false. Here is what you need to know about some of the myths and facts about reverse mortgages.
Myth – The home must be paid off or be debt-free to qualify.
FACT – Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner may be eligible for a reverse mortgage. In fact, many seniors use a reverse mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.
Myth – Children or heirs do not have options with their parents’ home if they receive a reverse mortgage.
FACT – Seniors should talk with their family about reverse mortgage. It is important to know that your heirs have options when it comes to your home after you get a reverse mortgage.
Myth – Reverse mortgages are only for seniors in need or for the “house rich, cash poor.”
FACT – Reverse mortgages are excellent financial planning tools that have been used by homeowners for all walks of life to enhance their retirement years. Many seniors are using a reverse mortgage today to help supplement their Social Security or other investments that they just don’t want to access at this time.
Myth – A reverse mortgage must be repaid in monthly installments, just like a conventional mortgage.
FACT – Unlike a conventional mortgage, a reverse mortgage is repaid only when the loan is due, typically when the borrower moves out or passes away. You can make a prepayment to your reverse mortgage at any time for any amount you choose if you want to.
Myth – It is the responsibility of the lender to pay homeowners insurance and property taxes.
FACT – The homeowner is responsible to stay current with insurance, property taxes, and maintenance on the home. Failure to do so could be considered a breach in terms of the loan and the loan could be called due at that time.
Myth – I must be debt free to qualify for a reverse mortgage.
FACT – You can still be eligible for a reverse mortgage if you still owe money on your existing mortgage. However, the existing mortgage balance must be paid off at closing on the reverse mortgage.
Myth – A reverse mortgage is a complicated home loan with a lengthy process.
FACT – A reverse mortgage is very similar to a conventional mortgage. The process is very similar and involves some of the same steps as a conventional mortgage. One of the differences with the reverse mortgage loan is it is for homeowners age 62 and older. How it works is a portion of the equity in your home is converted into tax-free money you can use for anything.
Another difference between a conventional mortgage and a reverse mortgage is it also allows you (as the borrower) to live in your home as your primary residence and not have to make another monthly mortgage payment. You can stay in the home you love until you move or are no longer living in the home.
To read more myths and facts about a reverse mortgage, check out our reverse mortgage myths and facts page.
If you have any questions about the reverse mortgage program you can contact us at (800) 401-8114 to talk to one of our licensed professionals. They can discuss your financial situation with you and determine if a reverse mortgage makes sense for you and your financial goals.