The Top Ten
Reverse Mortgage Myths
Separating fact from fiction The reverse mortgage is sometimes a misunderstood loan program. To help clarify what’s true and what’s not, this Residential Finance pamphlet provides straightforward reverse-mortgage mythbusting information. What is a reverse mortgage? Designed specifically for seniors, the reverse mortgage enables homeowners age 62 and older to convert a portion of their home equity into tax-free money without having to sell the home, give up title, or make a monthly mortgage payment. It’s called a reverse mortgage because the payment stream is “reversed.” Unlike a regular mortgage loan when the homeowner makes monthly payments to a lender, the arrangement is reversed and a lender makes payments to the homeowner. Now, turn the page to get the straight story…
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Myth busting! Reverse mortgage straight facts
Lending with
precision and care Since 1997, Residential Finance has mastered the art of making the loan process friendly, efficient and straightforward—every step of the way. As a nationwide mortgage banker, Residential Finance specializes in helping borrowers from all walks of life and all across the country find the ideal home loans to fit their goals. This award-winning company is “Full Eagle” certified by the U.S. Department of Housing and Urban Development and has Veterans Administration Automatic Authority. In addition, Residential Finance is seller-servicer approved by Fannie Mae and Ginnie Mae, with Freddie Mac approval pending. This designation, based on excellent business practices, is a status that few lenders attain.
Myth 1: I can’t get a reverse mortgage if I have an existing mortgage. False. If your house isn’t paid off, the proceeds you receive from the reverse mortgage will be used to pay off your existing mortgage, entirely eliminating the monthly mortgage payments.
Myth 2: The lender will own my home if I get a reverse mortgage. False. You remain the owner of your home; you retain the title until you choose to sell. As long as you continue to live in and maintain the home, and pay your property taxes and homeowners insurance, the loan cannot be called due.
Myth 3: The money I get from the reverse mortgage can only be used for certain purposes. False. There are no restrictions on how you use the cash proceeds from the reverse mortgage. You can use it for most anything, from paying off debt to financing a fabulous dream vacation or just creating a nest egg of reserves for future expenses. However, please be cautious, some lenders attempt to cross-sell other products you may not need.
... More myth busting! Reverse mortgage straight facts Myth 4: Reverse mortgages are only for low-income seniors who need financial assistance. False. Although some seniors may have a greater financial need for the funds that reverse mortgages offer, most simply prefer to be free of their monthly mortgage payment. Without the payments, and often with a tax-free cash reserve available, they can maintain or improve their quality of life. A growing number of homeowners use reverse mortgages to create a financial cushion for future expenses.
Myth 5: The lender can evict me if I outlive my life expectancy. False. Reverse mortgage lenders cannot put a time limit on how long you can stay in your home. With this type of loan, you continue to own your house and stay in it as long as you like. Of course, you are expected to maintain your home and keep current with property taxes and homeowners insurance.
Myth 6: A reverse mortgage will affect my government benefits. False. A reverse mortgage does not change regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive may count as an asset and alter Medicaid eligibility. To be certain, we recommend you consult with your federal benefits administrators or financial advisors if you are considering a reverse mortgage.
Myth 7: There is no one I can trust to give me straight facts on a reverse mortgage. False. In fact, you’re required to consult with an independent third-party counselor who is approved by the U.S. Department of Housing and Urban Development (HUD) in your local community. Your individual situation will be reviewed during an educational session with the counselor to help ensure that you are well informed before taking out a reverse mortgage.
Eligible primary residence types • Single-family home • Condominium
• Townhouse • One-to-four unit multi-family home
Empower yourself with knowledge Still have questions? I can help! Myth 8: My children will owe money once the home is sold and the debt is paid off. False. A reverse mortgage is a non-recourse loan, which means that the loan balance will never be greater than your home’s value. In the case of a shortfall, the Federal Housing Authority (FHA) picks up the difference. If you or your heirs want to retain the property, the balance must be paid in full. Any equity remaining in the property after the mortgage is retired belongs to you or your heirs.
Tax-free reverse mortgage money can be used for most anything • Debt consolidation • Home improvements • Healthcare expenses
Myth 9: Reverse mortgage lenders take advantage of seniors.
• Property taxes
False. Seniors who have been victims of reverse-mortgage lenders schemes are extreme exceptions and typically victims of unscrupulous lenders. As a consumer, you should only work with reputable lenders. You can protect yourself by conducting as much research as possible by checking with government agencies such as HUD, as well as your financial advisor.
• Wealth management
Discover how our preapproval letter
• New home purchase • Foreclosure avoidance
Myth 10: Seniors with a limited income cannot qualify for a reverse mortgage. False. The reverse mortgage is not like most traditional mortgages that require income and credit qualifications because the lender needs to be sure that you can afford the monthly payments. Instead, neither income nor credit score are qualifying factors with a reverse mortgage. Many seniors who don’t qualify for traditional financing are eligible for a reverse mortgage.
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Consumer_Brochure_ReverseMortgageMyths
Rev: 2/13/13 ©