Confusion about Reverse Mortgages

There is a lot of confusion about reverse mortgages. You need to be educated on the program so that you can make the best decision for your personal situation.

Basically, this is a loan that will allow you to use your home equity to have a monthly income coming in, or a large lump sum at once, or a credit line. You can get any combination of these things as well. If you have an existing loan, it must be paid off using the proceeds, so you will eliminate your monthly mortgage obligation. Although the government does not lend you the money, your reverse mortgage is guaranteed by the Federal Housing Administration (FHA), and you may remain living in the home. The debt that you or your estate owes can never be more than the value of your home.

Here are four commonly repeated myths, along with the facts, to help you further understand reverse mortgages:

MYTH 1
MYTH 1
The reverse mortgage lender owns your home.
FACT
FACT
You will continue to be the home’s owner and to hold its deed. You have simply taken a loan.
MYTH 2
MYTH 2
Qualification is difficult.
FACT
FACT
Though there are other qualifications, for the most part you only need to be 62 years of age or older and have substantial equity in your home. There is also a financial assessment to make sure that you can pay for taxes and insurance.
MYTH 3
MYTH 3
The fees associated with closing are much higher than they are for other loans.
FACT
FACT
This is more like a “half” myth, in that it doesn’t provide context. The fees are generally higher, but this is a unique loan that offers benefits that others do not. You are also required to undergo counseling before taking out a reverse mortgage, and this session will help you understand your options and how the fees compare.
MYTH 4
MYTH 4
This will affect your taxes and social security in a negative way.
FACT
FACT
The earnings you obtain from your reverse mortgage will generally not become an issue with Social Security benefits or income tax. However, your counselor will go over this with you.