If you’re a homeowner or homebuyer age 62 or older, a reverse mortgage can help you enjoy greater financial flexibility, whether you’re in retirement or still working. However, misconceptions about how reverse mortgages work are all too common, and they can prevent you or your loved ones from getting valuable information on a versatile financial option.
Here are a few common myths about reverse mortgage loans, along with facts to help you make a choice that’s right for you.
Fact: Contrary to popular belief, a reverse mortgage does not give ownership of your home to the bank. Instead, a reverse mortgage puts a lien on the property, allowing you to sell your home at any time.
When you have the facts, you can make better decisions about your retirement finances. To find out more about reverse mortgages, call me today.
Fact: While traditional mortgages require income and credit qualifications, a reverse mortgage typically does not use factor income as a qualification! This means that many seniors who don’t qualify for a traditional mortgage may be eligible for a Reverse Mortgage.
Fact: You don’t have to worry that your children will be responsible for your loan repayment. Although a borrower or their estate is allowed to retain ownership of the property, the owner can still sell the home. This results in any equity in the home going to the estate, not the bank.
Fact: A great feature of reverse mortgages is that the income received will not impact your social security or other benefits! Your reverse mortgage is considered a loan and therefore is not considered taxable income. It will not lower important social security and medicare benefits.
Fact: Are you worried that taking out a reverse mortgage will mean that your heirs won’t have anything to inherit? Your heirs or estate are only required to pay back the balance on the reverse mortgage. That balance only consists of the money used in the program along with the accrued interest on that amount. You have complete control over how much equity is used.
In addition, heirs have the opportunity to repay the loan to keep the home or sell the home and repay the loan. If the home sells for more than is owed, they keep the difference.
Fact: Although some believe that a reverse mortgage can result in the loss of a home, there is absolutely nothing to fear. As long as you continue to live in your home as your primary residence, keep the home up to the Federal Housing Administration (FHA) requirements, and pay your fees (property taxes, homeowner’s insurance, HOA dues, etc.) your home will not be foreclosed on.