Reverse Mortgage Myths
Mindless Mythology written by Jo Ann Harvey
Other Articles written by the Author
- Rightsizing your life – How Making Your Home the Right Size Makes Economic Sense
- Good Rightsizing Tactics – Make Plans and Follow Through
Do you believe in mythology? Hundreds of years ago, the Greeks did. They created myths surrounding powerful gods that supposedly controlled their world and their minds. Were these gods real? No, but the Greeks believed they were. It made them feel more secure and happy to be able to blame everything on “the gods.”
Many people today believe in myths. No, not in imaginary gods, but in strongly held ideas or theories that don’t hold water – kind of “false gods,” you could say. They continue to hold onto these beliefs because they have never truly looked into them to prove their veracity. These “myths” or “false beliefs” can cause people to make wrong life decisions without knowing it. More than we realize, our innermost thoughts and convictions rule the choices we make in life, for good or ill.
This is especially true when considering a reverse mortgage. Some people tend to believe what they have heard through word of mouth or read in negative articles on the subject, rather than seeking reliable information from an experienced advisor. In failing to do so, they pass up using a valuable tool which could make their lives incredibly more secure financially and generally more enjoyable.
The following are Reverse Mortgage myths to look out for and avoid:
Myth #1 – With a Reverse Mortgage, the lender owns the property.
FALSE! This is probably the most often held wrong belief. With a Reverse Mortgage, you still own your home as long as you continue paying the taxes and insurance and keep the propery in good condition.
Myth #2 – You must make monthly payments to repay the Reverse Mortgage.
FALSE! The loan only comes due when you (1) die or (2) move out of the home (and it can be paid off by the sale of the home.)
Myth #3 – I cannot afford a reverse mortgage because of my low income.
FALSE! A Reverse Mortgage is taken out of the equity in your home, so there are no monthly mortgage payments to be paid from your monthly income.
Myth #4 – I must be debt free to obtain a Reverse Mortgage.
FALSE! If you owe money on your home or have other debts, they can be paid off with the funds from the Reverse Mortgage at closing.
Myth #5 – With a Reverse Mortgage, you become ineligible for some government benefits, such as Medicare.
TYPICALLY NOT TRUE! A Reverse mortgage does not affect Medicare. It may affect SSI (Supplemental Security Income), Medicaid and some state and local programs. (Check with government officials on this.)
Myth #6 – When the home is sold, the left-over funds go to the lender.
FALSE! The difference between the sale price and the unpaid balance goes to the borrower or his/her heirs/estate.
Myth #7 – If I outlive my life expectancy, the lender will evict me.
FALSE! You own the home! The lender cannot evict you unless you fail to pay taxes or insurance, or fail to maintain the house.
Myth #8 – Reverse Mortgages are provided by the government.
FALSE! Reverse Mortgages are not a government benefit. The only thing the government does is, by means of the FHA (Federal Housing Administration), cause Reverse Mortgage loans to be insured against default.
Myth #9 – The lender must pay the taxes and insurance.
FALSE! Actually, it is the sole responsibility of the borrower to pay the insurance and taxes and maintain the property.
Myth #10 – There are rules about how the Revers Mortgage cash proceeds can be used.
FALSE! Cash proceeds can be used for any purpose.
Think about what you could do with the cash you’d receive from a Reverse Mortgage.
- Pay off your mortgage and never make another monthly mortgage payment.
- Pay bills that have been hanging over your head.
- Make renovations to your home.
- Travel to exotic destinations.
- Stay in the home you love with the pets you love.
- Or, with a special kind of loan, a Reverse Mortgage for Purchase move into a new home with no monthly mortgage payments.
Now it’s your call!! Don’t let myths get in your way.
Do you have questions about Reverse Mortgage? Please fill out a reverse mortgage inquiry here.
About the Author
Jo Ann Harvey is a retired schoolteacher and lives in San Diego. She loves to write and share her first hand experience on reverse mortgage with James Stanko, HECM Loan Specialist, NMLS # 1044434, Reverse Mortgage Funding LLC (RMF) to help others make smart decisions.