Top 10 Reverse Mortgage
Myths
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Myth 1 - Under the
terms of a reverse mortgage, the lender owns the
property. |
| This is probably the most common –
and most harmful – misconception, and it prevents many
would-be borrowers from even seeking information about
reverse mortgages. In fact, a reverse mortgage is a loan
– just like a conventional mortgage -and the borrower
keeps the title to the property. Ultimately, the
property may be sold in order to repay the mortgage, but
at no point while the reverse mortgage is outstanding
does the lender own the property. |
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Myth 2 - A reverse
mortgage must be repaid in monthly installments, just
like a conventional mortgage. |
| Unlike a conventional mortgage, a
reverse mortgage is repaid only when the loan is due,
typically when the borrower moves out or passes away.
The downside of this structure is that interest will
continue to accumulate (aka increase) for as long as the
loan remains outstanding. |
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Myth 3 - In order to
qualify for a reverse mortgage, you need to meet certain
credit and income requirements. |
| The only requirements for
obtaining a reverse mortgage are as follows: the
borrower must be at least 62 years of age, and the
property must be the primary residence. The lender
doesn’t care about your credit history or financial
position. |
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Myth 4 - I must be
debt free to qualify for a Reverse Mortgage |
| You may 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. You can choose to pay off the
balance with funds from the reverse mortgage or another
source. Additionally, no income or credit score
qualifications are necessary to be eligible for a
reverse mortgage. |
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Myth 5 - A reverse
mortgage will render one ineligible to receive certain
government benefits. |
| Reverse mortgages do not affect
entitlement programs such as Medicare. However, certain
need-based government aid programs, such as Supplemental
Security Income (SSI) and Medicaid, may be affected.
Additionally, your eligibility to participate in any
real estate tax deferral program offered by your city or
county may be impacted. This information is not intended
to provide any type of advice, and we recommend you
consult with your Medicare, Social Security or Medicaid
program administrator to determine the specific rules. |
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Myth 6 - When the home is
ultimately sold (if the borrower dies/moves out), any
leftover funds (after the reverse mortgage has been
repaid) inure to the lender. |
| When the home is sold, any
difference between the sale price and the unpaid balance
of the reverse mortgage is distributed to the borrower,
or to his heirs/estate. If the home has appreciated in
the interim, this should mean that there will be a
healthy surplus after such a sale. |
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Myth 7 - If the home
depreciates and the reverse mortgage is “underwater,”
the borrower is liable for the difference. |
| Reverse mortgages are non-recourse
loans, so-called because the lender is legally prevented
from seeking any deficiency judgment against the
borrower regardless of what happens to the value of the
property. |
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Myth 8 - Reverse
mortgage loans are handled by the government.
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| Reverse mortgage loans are not a
government benefit, and are not arranged by the
government. The government’s role (via HUD and its
subsidiary, the FHA) in reverse mortgages is to insure
them against default. |
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Myth 9 - It is the
responsibility of the lender to pay homeowners insurance
and property taxes. |
| In fact, the borrower’s only
financial responsibilities are to continue paying
homeowners insurance and property taxes, as well as to
maintain the property in accordance with the law.
Failure to do so could trigger a breach in the terms of
the loan, and even lender foreclosure. |
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Myth 10 - There are
rules stipulating how reverse mortgage funds can be
used. |
| Actually there are no
restrictions. The cash proceeds from the reverse
mortgage can be used for any purpose. It is recommended
that the borrower speak to a financial advisor. Many
seniors have used reverse mortgages to travel, pay off
debts, help their kids, make a luxury purchase or just
live more comfortably. |
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notice: Your privacy is protected on this site. We will
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vendors, real estate agents, mortgage companies, or
banks.
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For more information or to apply for a
reverse mortgage, call us toll-free
1-800-678-2155 |
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