Ten Reverse Mortgage Myths
1) I should shop around for the best possible interest rate on my Reverse Mortgage.
False: The federal government determines the interest rate for HECM (FHA Insured) Reverse Mortgages. This means that no matter what lender you go to for your Reverse Mortgage, the rate will be exactly the same. You want to look for a lender that is helpful, knowledgeable, professional, and concerned with your specific needs and the best possible way to address them.
2) I already have a first mortgage, so I can’t qualify for a Reverse Mortgage.
False: You can use the proceeds of your Reverse Mortgage to pay off the balance of your current mortgage or equity loan. By doing this, you will "free up" the monthly money you used to pay to the mortgage company for the first mortgage. That money is available to you now to do with as you see fit.
3) A traditional mortgage loan with a scheduled monthly payment costs me less, and is always better than a Reverse Mortgage.
False: Even though a conventional mortgage loan with monthly payments might be fine in some cases, in general they will cost more. Specifically, over a ten year period, a traditional loan of $75,000 will cost you approximately $30,000 more than a Reverse Mortgage! Also worth noting, the conventional mortgage loan has the risk of foreclosure, and a Reverse Mortgage does not.
4) I am not eligible for a Reverse Mortgage because my spouse is not 62 years old yet.
False: It is true that both borrowers must be 62 years or older. But if one spouse is not 62 yet, there are still procedures that can be employed to enable you to obtain a Reverse Mortgage. These strategies are commonplace and executable at the closing of the Reverse Mortgage.
5) If I have a Reverse Mortgage, I can lose my home and all of my remaining equity in the home to the government or the bank.
False: A reverse mortgage is only a lien on your home. You still own the home. When you decide to leave the home, the loan balance is due and repaid in full, with the remaining balance of your equity passing on to you or your heirs.
6) A Reverse Mortgage will consume all of the equity of my home, and there will be nothing left of my estate for my heirs.
False: Because you still own the home (you retain title to your property), and because it will continue to appreciate in value (dependent upon the market area, sometimes averaging 7.5% annually), it is almost impossible for the reverse mortgage to consume all of the remaining equity in your property. In fact, depending on your individual reverse mortgage and how much money you use throughout the term, the amount of equity you have in your home may increase.
7) I have a horrible credit history, so I won't qualify for a Reverse Mortgage.
False: There are no credit, asset, income, or health criteria necessary to qualify for a Reverse Mortgage. If you are at least 62 years old (or older) and you own a home, you qualify!
Note: Even if you are currently in process of foreclosure, you qualify and can save your home!
8) Reverse Mortgages are very expensive.
False: Although a Reverse Mortgage (like any other mortgage) has up-front costs that are incorporated into the loan, there are NEVER any out of pocket fees or monthly payments. Compared to other types of conventional loans that have monthly payments, a Reverse Mortgage is much more economical, especially for seniors.
9) I have to fix up my house before I qualify for a Reverse Mortgage.
False: Your home doesn't have to be in brand new condition. But if there are any structural repairs that affect the safety of the person(s) living in the home, or if any critical repairs are required by the lender, they can usually be scheduled to be done after the closing.
10) Selling my home outright is more beneficial than doing a Reverse Mortgage.
False: If you sell your home, you lose one of the largest and most secure investments you probably will ever have. You would lose 6-10% of the equity in your home to sales costs alone. And after selling it, you would most likely have to pay monthly rent or another mortgage payment that would erode your financial resources. Lastly, for most seniors, moving from their home is a very physically and emotionally difficult matter to endure through.
