Myths About Reverse Mortgages from Approval Reverse Mortgage

I have been involved in service industries throughout my career. My philosophy is to “be there” for my customers from the beginning to the end. I am “hands on” and make every effort to answer all questions and explain each step in the process of obtaining a reverse mortgage. My responsibility is to educate you so you can make an informed decision as to whether a reverse mortgage is the right option for you.  A part of education is to address some of the myths.

Myth:  Your home must be debt free to qualify for a Reverse Mortgage.   FALSE!

You may have a mortgage or other debt on your home. The mortgage or debt however, must be paid off first with the proceeds of the reverse mortgage.

Myth:  If I take out a reverse mortgage the lender will own my home.   FALSE!

 Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time.  As long as the borrower continues to live in and maintain the home and property taxes and homeowners insurance are paid, the loan cannot be called due.

Myth:  My children will be responsible for the repayment of the loan.

If the borrower or their estate wants to retain the property, the balance must be paid in full.  However, as long as the borrower or their estate sells the property to pay off the debt, there is no recourse if the reverse mortgage balance exceeds the home’s value upon sale. Due to built-in safeguards, the borrower or heirs can never owe more than the value of the home.  On the other hand, if there is cash remaining after the reverse mortgage is paid it belongs to the borrower or their estate.

Myth:  There are restrictions on how reverse mortgage proceeds may be used.   FALSE!

There are no restrictions.  The cash proceeds from the reverse mortgage can be used for virtually any purpose.  Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve. 

Myth:  You have to make monthly payments on your reverse Mortgage.   FALSE!

Unlike a traditional mortgage where mortgage payments are made each month, a reverse mortgage could pay you.  There are never any monthly payments to the bank.

Myth:  Only “cash poor” low-income seniors get reverse mortgages.   FALSE!

Even though some seniors may have a greater need than others for the cash or monthly income, the Reverse Mortgage can also be an excellent financial or estate planning tool.

Myth:  Once the proceeds are received, taxes will need to be paid.   FALSE!

The proceeds of a reverse mortgage is a loan, therefore, they are tax free.*

Myth:  You need a certain level of income, good credit, or good health to qualify.   FALSE!

A reverse mortgage does not have income, credit, or health requirements.

*Consult your tax advisor.