Common Reverse Mortgage Myths
There is a lot of information out there about reverse mortgages, do not be mislead by myths…get the facts here!
Fact: You and your heirs/estate retain ownership of the home. The lender's interest is limited to the loan balance and they will NEVER take control of the title.
Fact: A reverse mortgages is a "non-recourse" loan, meaning that you as the borrower can NEVER OWE MORE THAN YOUR HOME'S VALUE, regardless of the loan balance.
Fact: The terms of your loan can NEVER change. In the end all loans end up with Fannie Mae. At closing you sign legal documents, ensuring that your loan's terms cannot change.
Fact: The loan may be repaid from the sale of the home or by refinancing the existing reverse mortgage. All remaining equity belongs to the heirs/estate. You have six months (in some cases up to 1 year) to repay the reverse mortgage.
Fact: A reverse mortgage does NOT affect these or most other means tested benefits. If you receive Supplemental Security Income payments, you must spend the proceeds from the reverse mortgage. In short, the monthly cash advances need to be fully spent every month and not accumulated. It is advisable to check with your local area agency on aging since programs do vary by state.
Fact: There are no health requirements.
Fact: There are no income or credit requirements.
Fact: You can still qualify if you have an existing mortgage or other home-related debt. However, the proceeds of the reverse mortgage must be used to pay off those debts.
Fact: Reverse mortgage proceeds are tax free because they are considered borrowed funds.
Fact: It is true that some seniors may have greater need than others for cash or an increased monthly income. It is also true that a reverse mortgage can be an excellent financial estate planning tool for any senior that has sizeable equity in their home.
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