Homeowners who are at least 62 and older may qualify for a reverse mortgage and never have to make another monthly mortgage payment* as long as they live in the home. In fact, clients actually receive money from the lender! There are many benefits of a reverse mortgage, but there are also some myths out there that may make people question if they should get one. Read below to learn the truth behind a few popular myths regarding this type of loan.
Myth One: “I can’t get a reverse mortgage if I already have a mortgage on my house”.
Fact: If you have enough equity in your home, a reverse mortgage can pay off the rest of your current home mortgage. You also do not have any constraints on how you use or spend your money you receive from the reverse mortgage. It is important to remember that you are still responsible to pay your taxes, maintenance, and insurance on your home.
Myth Two: “If I outlive my life expectancy, the lender may foreclose on my home”.
Fact: There is no time limit on how long you can live in your home. With a reverse mortgage you still own your home* and will not be forced to foreclose your home if you outlive your life expectancy. As long as the home remains your primary residence and you maintain your home while paying taxes and insurance, you can stay in the home you own.
Myth Three: “Making the decision for a reverse mortgage is something you decide on your own with no objective advisor available to you”.
Fact: HUD ensures a third party is there to educate you on the loan. In fact, during the process of getting a reverse mortgage, you are required by the government agency to complete a reverse mortgage counseling session with a HUD-approved advisor. This counselor will explain all of your financial options so you can be informed when making your decision.
Myth Four: “There are limits on how you can spend the money from your reverse mortgage”.
Fact: There is no restrictions on how you spend your tax-free money** you receive from the reverse mortgage. So if you ever hear that myth, know that it is not true. You can spend your money on vacations, clothes, food, etc. There are no rules on how you spend your money from the reverse mortgage.
Myth Five: “There are taxes on a reverse mortgage”
Fact: Luckily for you, the cash you receive for your reverse mortgage is tax free money**. It is tax free because the money you receive is not considered income. You may be thinking “What about when the reverse mortgage is repaid, is the interest paid on the loan taxed?” The answer to that is no it is not.
One of the Quicken Loans ISM’s is “Ignore the Noise.” We hope these facts can help you ignore the myths you hear. Get in contact today with a One Reverse Mortgage expert to help you learn all the information about getting a reverse mortgage and how it could benefit you.
*Homeowner is still responsible for taxes, insurance and property maintenance.
**Please consult with your financial adviser.