Reverse Mortgage Myths
In almost any field there are myths that take on a life of their own until we’ve heard them so many times that they must be true. Certainly the Reverse Mortgage field has not escaped the creation of myths – we hear at least one of these each day. Here we’ll dispell the most often repeated Reverse Mortgage myths:
- The lender will take my home.
No. The deed to your home remains in your name until or unless you decide to sell the property. You are still responsible to pay your property taxes, homeowner’s insurance and repairs on the home. - I’ll never be approved because my credit is so bad.
No, your credit does not enter into the decision to approve your Reverse Mortgage. Since you will not be making monthly payments on your loan, a good credit report is simply not necessary. In addition, there are no income requirements; you need only be 62 years of age or better. - I still have a mortgage on my home, so I can’t get a Reverse Mortgage.
No, you can still qualify for a Reverse Mortgage if you presently have a mortgage on your home; however, the funds from the Reverse Mortgage will have to satisfy your existing mortgage at the closing. - A Reverse Mortgage will affect my Social Security and Medicare benefits.
No, funds that you receive from a Reverse Mortgage are not considered income. Those funds are a withdrawal of equity from your home; thus, are not subject to Social Security or Medicare regulations. If you are receiving Medicaid, you will need to structure your Reverse Mortgage in such a way so as to conform to Medicaid guidelines. - I’ll owe taxes on the money I receive from the Reverse Mortgage.
No, remember that the money received from a Reverse Mortgage is not considered income; thus, no income taxes are owed to the IRS or state income tax agencies. - My heirs might be stuck with a huge bill if the value of the home goes down.
No, a Reverse Mortgage is a non-recourse loan, which means that you cannot be obligated to pay back more than the market value of the property when the home is sold. However, if you default on the loan by not paying your taxes or insurance, you would owe the full balance, even if it is more than the market value. - There are restrictions as to how I can spend the money from a Reverse Mortgage.
No. This is your money to spend any way you wish. Senior homeowners often use the money for home improvements, paying off credit cards, medical bills, in-home healthcare, a new car, travel, help a relative or to set up a college fund for their grandchildren.
It's your Money.
