There’s a lot of misinformation and confusion regarding Reverse Mortgages. Our goal is to make sure you are properly informed so you can make the best decisions in regards to your retirement and lifestyle.

Reverse Mortgage MYTHS Vs. FACTS

MYTH: You don’t own the home anymore–the lender does!

Fact: 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 house is maintained 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.

Fact: False. Reverse mortgages are non-recourse loans. That means, if the property is sold to pay-off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. The maximum amount owed is the current market value of the house. If the homeowner’s heirs want to keep the home, they would pay the balance in-full to the reverse mortgage lender.

MYTH: Only low-income seniors get reverse mortgages.

Fact: False. The reverse mortgage is a power tool for retirement and investment planning! Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgage offer, most simply prefer to be free of monthly mortgage payments. Without monthly payment mortgages, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses. (See the Why the Reverse Mortgage page)

MYTH:There are no objective advisors available to seniors trying to decide if reverse mortgage suits their needs.

Fact: False. INTELLIGENT REVERSE recommends consulting with a certified financial planner at the beginning of your retirement planning process and deciding along with your CFP if a reverse mortgage is right for you. Further, Borrowers are required to work with independent, third-party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

MYTH: There are restrictions on how the money can be used.

Fact: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.

MYTH: Reverse mortgage lenders take advantage of seniors.

Fact: False. Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. And there are those lenders who will slam you into a reverse mortgage if you qualify whether the reverse mortgage is best for your individual circumstances. Intelligent Reverse encourages you to work with a certified financial planner. As a consumer, you should work with a CFP who is knowledgable about reverse mortgages. “By ignoring home equity and the benefits of a reverse mortgage, the adviser may be placing the client in a worse situation than if there had been an error of omission. The failure to plan or the failure to consider an option can also lead to liability.”2

MYTH: My family will lose their inheritance.

Fact: Your heirs will still inherit your home, but they will have to pay back the loan balance if they want to keep it; this includes the amount of funds you used plus accrued interest and fees. They can also sell the home to repay the loan. Once it’s repaid, they retain any remaining equity.

MYTH: My spouse won’t be provided for after I pass away.

Fact: Your co-borrowing spouse is entitled to remain in the home as their primary residence, enjoying all the benefits of the reverse mortgage, as long as they continue to meet the loan obligations (keeping current with property taxes, insurance, maintenance and any homeowners association fees). A qualified non-borrowing spouse who meets certain conditions can continue living in the home; however, they will not have access to any additional reverse mortgage funds since they are not a borrower.

MYTH: A reverse mortgage will interfere with my Social Security.

Fact: The funds from a reverse mortgage generally do not affect regular Social Security or Medicare benefits. However, needs-based benefits, such as Supplemental Security Income or Medicaid, may be affected. Consult with a financial professional about your individual situation; visit www.ssa.gov.

MYTH: Reverse mortgages have excessive fees.

Fact: The reverse mortgage typically has higher fees than forward mortgages, but the reverse mortgage doesn’t have excessive fees. There is an upfront mortgage insurance fee that allows the FHA to guarantee the loan for lenders so it can be a non-recourse loan (you’ll never owe more than the home is worth). On a HECM, how much a lender can charge is regulated by the government. Further, any costs you incur for a reverse mortgage can be wrapped into the loan and paid when you sell the home, though. The only fee you must pay out of pocket upfront is the reverse mortgage counseling fee because it’s paid to a third-party counseling agency.