Overall, reverse mortgages can be a valuable tool for seniors looking to supplement their retirement income or finance large expenses. However, there are some myths circulating, so it is important to understand the facts of the new reverse mortgage program so you can make the best decision for you. 

 

Here are the most common myths associated with reverse loans :

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Myth: The lender takes ownership of the home.

Fact: The borrower retains ownership of the home and is responsible for paying property taxes, insurance, and maintenance fees.

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Myth: The borrower can owe more than the value of the home.

Fact:  The reverse mortgage amount cannot exceed the home's appraised value, and the borrower or their heirs will never owe more than the home is worth.

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Myth: The borrower must have no mortgage or own the home outright.

Fact: Borrowers can still qualify for a reverse mortgage even if they have an existing mortgage on their home, as long as they have sufficient equity.

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Myth: The borrower can be forced to leave their home.

Fact:  As long as the borrower meets the loan obligations, including paying property taxes and insurance, they can remain in their home for as long as they wish.

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Myth: Reverse mortgages are only for low-income seniors.

Fact:  Reverse mortgages are available to all eligible seniors, regardless of income level.

 

Myth: The borrower must repay the loan while still living in the home.

Fact:  Repayment of the loan is not required until the borrower no longer lives in the home.

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Myth: Reverse mortgages are a scam.

Fact:  Although there we issues with reverse mortgages in the past, the new reverse mortgage program underwent significant changes starting in 2017, designed to protect borrowers and their heirs. Today the new reverse mortgage is a legitimate financial product, regulated by the government and offered by reputable lenders. 

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Myth: The borrower will lose all their equity.

Fact:  The borrower can only access a portion of their home equity through a reverse mortgage, leaving the remaining equity to be passed on to their heirs.

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Myth: The borrower cannot leave the home to their heirs.

Fact:  Heirs can inherit and keep the home by either paying off the reverse mortgage or obtaining a new one to cover the outstanding balance.

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Myth: The borrower can receive the full value of their home through a reverse mortgage.

Fact:  The amount of cash available through a reverse mortgage is determined by several factors, including the borrower's age, the value of the home, and the interest rates at the time of the loan.

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Myth: The borrower will be taxed on the proceeds from a reverse mortgage.

Fact:  The proceeds from a reverse mortgage are not considered taxable income, as they are a loan and not a source of income.

 

To determine the right course of action for your lifestyle and unique circumstances, contact us to schedule a free consultation with a Live Better Financial specialist in your area.