TOP 8 REVERSE MORTGAGE MYTHS

Top 8 Reverse Mortgage Myths 
 
1.    I would be selling my house to the bank
2.    My heirs won't inherit anything
3.    I might "outlive" the loan
4.    I could get forced out of my home
5.    Social Security and Medicare will be affected
6.    I would have to pay taxes on the reverse mortgage
7.    There are big out-of-pocket expenses
8.    A reverse mortgage is similar to a home equity loan

1.    I would be selling my house to the bank. 
FALSE     You keep the title to your house.  The lender will add a lien on the property but you will still have complete control over it.
 
2.    My heirs won't inherit anything. 
FALSE     Your estate only owes the balance on the reverse mortgage. The balance is however much you've spent and interest. Let's say you got a reverse mortgage and owed $50,000 after 5 years. Then you decided to sell the house for $250,000. The lender gets $50,000 and you get $200,000.

3.    I might "outlive" the loan. 
FALSE     FHA/HUD reverse mortgages are designed specifically so that you can't outlive the loan. When you get the reverse mortgage, the lender will charge you .5% or 2.5% (depending on your initial loan amount needed to pay mandatory oblibations) to purchase mandatory FHA mortgage insurance. That insurance guarantees that even if you live to be 100, you can never owe more than the value of your home and you can never be forced to leave.
 
4.    I could get forced out of my home. 
FALSE     FHA/HUD reverse mortgages specifically state that you can not be forced out of your home unless you fail to pay the taxes and insurance or keep the home in good condition.
 
5.    Social Security and Medicare will be affected. 
FALSE     Money from a reverse mortgage is not considered income because it is a loan. For this reason, a reverse mortgage does not lower Social Security and Medicare benefits.

6.    I would have to pay taxes on the money I get from a reverse mortgage. 
FALSE     You already paid taxes on the money when you were putting the equity into your home. When you take it out again, it is not taxable.

7.    There are big out-of-pocket expenses. 
FALSE     All of the costs, whether closing costs or interest, can be financed. If you choose not to close on your reverse mortgage for any reason you will be responsible for the cost of the appraisal.

8.    A reverse mortgage is similar to a home equity loan.
FALSE     First, home equity loans may have many requirements such as high income, low debt, and good credit that a reverse mortgage does not.

Second, you can "outlive" a home equity loan and end up being foreclosed on by the bank. This can never happen with a reverse mortgage.

Third, a reverse mortgage usually has significantly lower interest rates.