Many people have learned wrong information about reverse mortgages. This tends to scare people away from a great opportunity to enrich their retirement years. Here are some of the most common myths and misconceptions about reverse mortgages:
1. Will the bank take my house?
NO! – the bank never owns your house – you always retain title. The bank will place a lien on your house for the reverse mortgage, just like they would for a regular mortgage.
2. Will my heirs have to pay too much to pay off the Reverse Mortgage?
NO! – a reverse mortgage is a non-recourse loan. You and/or you heirs will never owe more than what the house is worth, even if house prices decline.
3. I still owe money on a mortgage now, can I get a Reverse Mortgage?
YES! – if you are age 62 or older and depending on how much you owe, you can still get a Reverse Mortgage. We can calculate the amount that you will be eligible for, and let you know if there is enough to pay off that first mortgage and live comfortably.
4. Is the money from a Reverse mortgage considered ‘income’?
NO! – Proceeds from a Reverse Mortgage are not considered income, and therefore do not affect any eligibility programs, including tax breaks. Please consult a professional if you are receiving Medicaid or SSI benefits to make sure you stay within those guidelines.
5. My home is titled in a ‘Life Estate’; can I get a Reverse Mortgage?
YES! – A Life Estate is permissible for Reverse Mortgages, and a great financial planning tool! We would have to review your situation and documents in order to give you a definite answer, but most life estates do qualify for a reverse mortgage.
6. Will the lenders ’get’ not only the house, but everything else in it and all my other assets?
If you own a house, how can you get money out of it ‐‐ and still live there? You can’t just sell your attic or downstairs bathroom, and who wants to live in the basement or rent part of your home to strangers?
One answer is a Home Equity Conversion Mortgage or Line of Credit. Instead of paying the lender, as you would do with a normal “forward” mortgage, the lender pays you. As the saying goes a HECM (pronounced hek‐um) is for people who are “house‐rich” and “cashpoor”.
The most popular kind of senior mortgage is the Department of Housing and Urban
Development’s (HUD) Home Equity Conversion Mortgage (HECM). One reason: All reverse
mortgages require borrowers to attend an impartial counseling session by a HUD‐approved counselor before they can proceed. Homeowners age 62 or older can choose to receive their money in a number of ways:
- a line of credit,
- a lump sum payment
- Monthly income for as long as they live in the house.
- Or any combination of the above. (The line of credit is the most popular ‐‐
since homeowners don’t owe any interest until they take money out.)
The common theme here is that a HECM can have a useful purpose and they are very safe mortgage products backed by the Federal Housing Administration and HUD. Make your retirement more comfortable and financially easier!