Reverse mortgages are often misunderstood, leading to a number of myths and misconceptions. Here are seven common myths about reverse mortgages, along with clarifications:

1. Myth: The Lender Takes Ownership of Your Home – Reality: With a reverse mortgage, the borrower retains ownership of the home. The lender only places a lien on the property, which is used as collateral for the loan. The borrower must continue to pay property taxes, homeowners insurance, and maintain the home.

2. Myth: You Can Be Forced Out of Your Home – Reality: As long as the borrower meets the loan obligations (such as paying taxes and insurance, and maintaining the home), they can stay in the home for as long as they lives in their home. The loan is only due when the borrower sells the home, moves out permanently, or passes away.

3. Myth: Reverse Mortgages Are a Last Resort – Reality: While reverse mortgages are often marketed to those with limited income, they can also be a strategic financial tool for retirees. Some use them to supplement income, delay drawing down on other retirement assets, or as a line of credit that grows over time. You can use proceeds from a Reverse Mortgage to buy a second home. It’s your money!

4. Myth: Reverse Mortgages Have High Fees and Interest Rates – Reality: Fees and interest rates for reverse mortgages are comparable to those for traditional mortgages. However, it’s essential to shop around and understand the full cost structure, including any mortgage insurance, closing costs, and origination fees. Ask for an itemization of all fees and closing costs up front. We’re happy to provide this.

5. Myth: Your Heirs Will Be Saddled with Debt – Reality: Reverse mortgages are non-recourse loans, meaning the borrower or their heirs will never owe more than the home’s value at the time the loan is repaid. If the home is sold for less than the loan balance, the Federal Housing Administration (FHA) insurance covers the difference.

6. Myth: You Can’t Get a Reverse Mortgage If You Have an Existing Mortgage – Reality: You can get a reverse mortgage even if you still have a mortgage, but the reverse mortgage proceeds must first be used to pay off the existing mortgage. A reverse mortgage will eliminate monthly mortgage payments, freeing up cash flow.

7. Myth: Reverse Mortgages Are Only for the Poor – Reality: Reverse mortgages can be useful for a wide range of retirees, regardless of income level. They are often used by those with significant home equity who wish to improve their retirement cash flow or preserve other assets. Many use reverse mortgage proceeds as a financial planning tool. Remember, it’s your money!

Would you like more information on any of these points? Call, text or email. My contact information is on the left.