There's a lot of misinformation going around about reverse mortgages. We aim to set the record straight.
Misinformation: The Lender Owns My Home Now
Fact: False. You actually retain your title and said ownership to your home over the entire course of the loan. You can also decide when and if you sell it at any time. You are responsible for maintaining the home and paying your property taxes and insurance payments, however; which are standard clauses in any home loan.
Misinformation: My Kids Will Have To Repay My Loan
Fact: False. This is entirely untrue. Reverse mortgages are in a category of non-recourse loans. What this means is that if the owner passes away or abandons the property, it's sold to repay the debt with no debt liability of any type remaining debt being left to family members. The cap on the amount owed is limited by the market value of the home.
Misinformation: You Can't Get A Reverse Mortgage If You Have a Mortgage
Fact: False. In actuality, if you have substantial equity, you can get a reverse mortgage. But this mortgage must retain the first lien position, which means that your existing mortgage would have to be repaid out of the proceeds of the loan, with the difference, after closing costs, going to you. The leading reason why most people take out reverse mortgages is to actually pay off their existing mortgage.
Misinformation: If You Are Not Low Income, You Do Not Qualify
Fact: False. There are no income or credit requirements on reverse mortgages. In fact, a lot of older Americans take them out just to add to their nest egg and further safeguard their retirement.
Misinformation: If I Live Too Long I Can Get Evicted
Fact: False. You cannot get evicted regardless your age. Provided you adhere to the rules of your loan, there is nothing that can be done to evict you from your home.
Misinformation: I Can't Use The Money On What I Want
Fact: False. It is your money. You can do as you see fit with it. Whether you want to remodel your home, pay for your child's wedding, go on vacation, stash the money in a bank account or what-have-you, there are no restrictions on what you can do with your funds.
As you can see, there's quite a bit of misinformation about reverse mortgages. It's always helpful to conduct proper due diligence before making your decision. Speak to your financial advisor first to learn the truth about these home loans.