Reverse Mortgage Myths

Reverse Mortgage Facts and Myths

As reverse mortgages continue to grow in popularity, so have the misconceptions or myths about these unique loans.  MSI Reverse Mortgage would like to review these misconceptions and discuss the facts.

MYTH#1  The bank takes away or I will lose my home.
FACT: The borrower is the title owner when taking out a reverse. The borrower keeps the title to the home throughout the life of the reverse mortgage, regardless of your age or time in home.
+ The borrower cannot , as a result of the reverse mortgage, be forced out of their home as long as property taxes and  home owners insurance is paid, the home is kept in reasonable living condition and at least one borrower resides in the home and keeps as their primary residence.
+ The loan must be repaid once the last borrower permanently moves out of the home, through death, selling of the home, or permanent stay in a nursing.

MYTH #2  The Home must be debt free to qualify for a reverse mortgage.
FACT: Reverse mortgages convert home equity into cash. As long as there is sufficient equity in the property, the homeowner can qualify for a reverse mortgage. In fact many seniors  use a reverse mortgage to pay off an existing mortgage in order to eliminate monthly mortgage payments and increase their monthly cash flow.

MYTH #3  The Bank sells the home when the reverse mortgage becomes due.
FACT: The borrower has title and ownership to their home , not the bank or lender. So while it’s common for the borrower or heirs to sell the home to repay  the loan, it’s a decision the borrower or the heirs to make. The borrower or heirs might also refinance the home in order to repay the loan.

MYTH #4  My children won’t be comfortable with me obtaining a reverse mortgage
FACT: Seniors are encouraged to talk with their children about reverse mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children’s education. Often the children of many seniors are happy that their parents have a financial solution available to help them become more independently and financially secure.

MYTH #5  The Borrower could end up owing more than the home is worth.
FACT: Two of the great built-in safeguards of reverse mortgages are :
1)  They are structured so that the borrower can never owe more than the fair market value of the home upon repayment*
2)  The  HECM (Home Equity Conversion Mortgage) products are insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD)
*When the HECM becomes due and payable as a result of the borrower’s death and the property is conveyed by a will or operation of law to the borrower’s estate or heirs (including a surviving spouse who was not on title and the reverse note) that party may satisfy the HECM mortgage by paying the lesser of the mortgage balance or 95% of the appraised property value. If the last borrower has moved out of the property or has passed away and the property will be sold in an arm’s length tranaction (sold to someone not related to the borrower or heirs), the property may be sold for the fair market value and neither the borrower’s estate nor the heirs will be responsible for a deficiency balance.

MYTH #6  Reverse mortgages proceeds will impact Social Security and Medicare benefits.
FACT:  A reverse  mortgage will generally not affect regular Social Security payments or Medicare benefits. Depending upon the borrower’s situation, a reverse mortgage may affect benefits one receives, if any,from the Federal Supplemental Security Income (SSI) program, or state-administered program like Medicaid. It is recommended that the borrower speak with his or her financial advisor and appropriate governmental agencies.

MYTH #7  There are restrictions on how the money is used and taxes will have to be paid on it.
FACT:  There are NO restrictions on how or what you decide to do with the money.The cash proceeds from a reverse mortgage can be used for almost any purpose and since it’s already your money ,IT”S TAX FREE. Many seniors have used reverse mortgages to travel,pay off debts, help their kids,or more importantly use it to have a monthly income or to structure your reverse mortgage to pay you out monthly income for the rest of your life while living in your home. As we are living longer, the reverse mortgage is becoming a long-term financial planning tool to secure your financial independence and to live more comfortably.

MYTH# 8 Reverse mortgages are only for seniors in need, or for the ‘House Rich, Cash Poor’.
FACT: Reverse mortgages  are an excellent financial planning tool that has been used by homeowners from all walks of life and all net worth levels, to enhance their retirement years. In fact with the reverse lending limits up to $625000, many seniors are benefiting from increased cash benefits from a reverse mortgage.

 Qualifying for a reverse mortgage is easy, there are no credit or income requirements.
Contact one of our Reverse Mortgage Specialists at MSI today at 855 901 3100 or visit us on the web at: www.msireversemortage.com