Myths & Truths
1. The lender will own your home:
False:
You and your family, or your estate, continue to retain ownership of your home.
The lender does not take control of the title. The truth is that the home must be
in and REMAIN in the name of the borrowers only. Since the Reverse
Mortgage is a mortgage, a lien is placed on the property just like any other mortgage.
This assures that the lender will eventually be repaid but for only the amount owed. Again, this is just like
any other type of mortgage. Another fact is that about 95 percent of all Reverse
Mortgages done are the Federal Housing Administration (FHA) Home Equity Conversion
Mortgage (HECM). Each HECM loan is insured by the FHA
through the collection of required mortgage insurance premiums.
2. The lender cannot wait for me to “get out of my house” so the lender can
be repaid:
False:
Reverse Mortgage lenders are not in the business of selling houses. The truth
is, they are in the business of helping you keep your home and meet
whatever financial needs you may have in order to help you maintain financial independence.
Reverse Mortgage borrowers may remain in the home for as long as they wish. Should
they decide to sell the home for any reason, the loan would then become due and
payable.
3. My heirs will be responsible for my loan:
Yes & No:
The Reverse Mortgage is a non-recourse loan and as such, the estate will never be required to pay the lender more than the proceeds from the sale of the property. The estate can choose to keep the property by either refinancing the loan balance
or by paying the loan balance off in full.
4. The Interest Rate on Reverse Mortgages is higher than other mortgages:
False:
The FHA Reverse Mortgage interest rate is based on the one month LIBOR (London InterBank Offered Rate) and in some cases below conventional levels.
5. Requirements for obtaining a Reverse Mortgage are stringent:
False:
There are NO income or credit requirements. Even bankruptcy does not disqualify
as long as it has been discharged.
6. A Reverse Mortgage is taxable and affects Social Security and Medicare:
False:
That is NOT the case. Reverse Mortgage proceeds are not taxable
because they are not considered income but are, in fact, a loan. Also, since the
United States Government sets Social Security, Medicare, and FHA Reverse Mortgage
rules, they have all been made compatible.
It should be noted that Supplemental Security Income (SSI) and Medicaid may be affected
if you exceed certain liquid asset amounts. Our Senior Home Advisors will show you
how to make these programs compatible so getting a Reverse Mortgage will not affect
these benefits.