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Another 5 Reverse Mortgage Myths Debunked!

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Reverse Mortgage Myths

Today, we will separate the facts from fiction about reverse mortgages so that you are able to make the decision about whether or not this is the right financial option for you. With the surrounding negative media attention on reverse mortgages, it is best to find out how reverse mortgages really work and how they can affect you.

HECM (Home Equity Conversion Mortgage) loans, also known as reverse mortgage loans are a great financial tool for senior homeowners over 62 years of age. Seniors are able to tap into a portion of their home equity and turn it into cash without requiring the borrower to make monthly payments. However, as popularity of reverse mortgages increase, so do the myths and misconceptions about the reverse mortgage industry. From horror stories about borrowers losing their homes to reverse mortgages being outright scams – it is easy to see why people can be wary of reverse mortgages.

Read more as we debunk some of the more common myths about reverse mortgages.

Myth #1: My children and/or heirs will be responsible for the repayment of my reverse mortgage loan.

False. Your heirs will not be held responsible to pay back your loan. However, as heirs, they have options on what they are able to do with the property after the last borrower passes away. After the remaining borrower passes away, any of the following can take place:

  • They can repay the full balance on the loan and keep the property.

  • They can work with the bank to refinance the loan.

  • They can sell the property and use the proceeds to pay off the loan.

  • They can turn the property over to the lender and walk away without any liability to the loan.

Because this is a non-recourse loan, the heirs will not be held responsible to pay for more than the house is worth at a bona fide sale. Whether they want to keep the home or sell it, the heirs of the deceased has up to 12 months to work with the bank.

Myth #2: Reverse mortgages are only for low-income seniors.

False. Reverse mortgages are not only for low-income seniors. Any senior homeowner with substantial equity in their home can take advantage of this program. Although there are some borrowers who may benefit from receiving the extra money, many borrowers use their reverse mortgage funds to help them be free of paying monthly mortgage payments. With the extra cash from their reverse mortgage funds, borrowers are able to maintain a cushion that is available for a rainy day.

Myth #3: My Social Security and Medicare will be affected.

False. Reverse mortgages will not affect your Social Security and Medicare benefits. However, it may affect your Medicaid benefits. Please speak with a qualified financial advisor to see if a reverse mortgage would affect your benefits.

Myth #4: The lenders can evict me if I outlive the reverse mortgage loan.

False. Reverse mortgages were created to allow senior citizens to age in place indefinitely. Reverse mortgage lenders do not put a time limit on how long you can stay in your home. You do not have to worry about being evicted by the bank as long as you are keeping up with the loan requirements (maintaining the property, paying property taxes and insurance, and living in the home as primary residence).

Myth #5: Reverse mortgage lenders are out to take advantage of seniors.

False. With any industry, there are always people who are looking to take advantage of others and there have been some cases where seniors have become victims of reverse mortgage schemes. However, those are extreme cases and as long as you do your research, you should be okay. Borrowers should verify if their lenders are members of the Better Business Bureau (BBB) and the National Reverse Mortgage Lenders Association (NRMLA). Also, be sure that you choose your own reverse mortgage counselor for the counseling session, as they can ensure that they provide you with third party, unbiased information.

If you want to learn more about reverse mortgages, you can speak with an advisor at 1-888-808-8486.

Read Related Articles:

5 Reverse Mortgage Myths Debunked

5 Reverse Mortgage Facts


Image courtesy of [Danilo Rizzuti] / FreeDigitalPhotos.net

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