Myths & Truths

MYTH:  I'll end up losing my house.
Not true! That's one of the unique advantages of a reverse mortgage. Since there are no payments to make, you'll never be in default of the loan.

MYTH:  When I pass away the bank will take my home.
Nope! Your home is part of your estate and will remain so upon death. Your heirs can choose to convert the reverse mortgage to a standard mortgage and keep the house, or they may choose to sell the home, pay off the reverse mortgage, and keep the remaining equity. It's their choice!

MYTH:  I can't afford the monthly payments.
Actually there are no monthly payments to make. The loan is not paid back until the homeowner vacates the home.

MYTH:  I'm not old enough to qualify.
You only need to be 62 to qualify for a reverse mortgage.

MYTH:  I won't qualify due to my poor credit.
Credit history has nothing to do with qualifying for a reverse mortgage. The main qualifications are your age, the equity in your home (it should be paid off or close to it), and your home must be your primary residence. However, if you are delinquent on any Federal loans, you must use the equity from your reverse mortgage to satisfy those first.

MYTH:  I'm in bankruptcy so I won't qualify.
Not necessarily so! You can use a reverse mortgage to get yourself out of bankruptcy. The only stipulation is that if you are approved for the program, you MUST use the money to discharge your bankruptcy.

MYTH:  The interest rates are too high.
The interest rates are generally much lower than a standard mortgage.

MYTH:  I already have a mortgage so I won't qualify.
Depending on the equity in your home, you may be able to use a reverse mortgage to pay off your existing mortgage. In fact, depending upon how much equity you have in the home, you may be able to pay off your existing mortgage AND take out additional cash to use in any manner you choose.

MYTH:  I can't afford the up front costs.
Not necessarily true! The costs associated with a reverse mortgage are similar to those of a conventional mortgage. However, these costs can be included within the loan, meaning you won't have any out of pocket expenses.

MYTH:  I'll end up owing more than my house is worth.
Not true! Reverse mortgages contain a provision that your loan amount will never exceed the value of your home.

MYTH:  I defer my property taxes so I must already have a reverse mortgage.
While deferring your property taxes is similar to a reverse mortgage, it is not the same. Both require the loan amount to be paid back upon vacating the home. However, a reverse mortgage actually allows you to tap into the additional equity in your home, over and above the cost of the property tax. Reverse mortgages generally have a much lower interest rate than those associated with a tax deferral program.

MYTH:  Reverse mortgages aren't safe.
Not true! Since a reverse mortgage is a HUD program backed by the Federal Government, reverse mortgages are very safe. FHA and Fannie Mae guarantee the payments that are made to you. They also guarantee you can stay in your home as long as you like.

MYTH:  If I die, my spouse will be forced to leave the home.
Not true! Your spouse is free to live in the home as long as they like. The loan isn't required to be paid back until they vacate the home.

MYTH:  If I use a Reverse Mortgage to establish a Line of Credit, I must begin making payments on the amount which I've used.
Partly true. The Line of Credit must be paid back, but not immediately. Just like the various other payment options, the Line of Credit is only paid back once you vacate the home.