Common Myths about Reverse Mortgages
By Carl Benefield, Northshore & New Orleans LIVING WELL Magazines
A reverse mortgage enables homeowners 62 and older to convert part of the equity in their homes into cash without having to sell the home, give up title, or take on a new monthly mortgage payment. The homeowner continues to pay insurance and taxes, live in and maintain the home.
The reverse mortgage is aptly named because the payment is “reversed.” Instead of making monthly payments to a lender, as with a regular mortgage, a lender makes payments to you. Below are common myths that are important for you to be aware of as you investigate the benefits of our product.
Myth 1: I cannot get a reverse mortgage if I have an existing mortgage.
Fact: False. If your home isn’t paid off, the proceeds you receive from the reverse mortgage must first be used to pay off any existing mortgage. This is the most common reason most homeowners 62 years and older take out a reverse mortgage.
Myth 2: If I take out a reverse mortgage the lender will own my home.
Fact: False. Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. There is no time limit on how long you can have a reverse mortgage. As long as the borrower continues to live in and maintain the home and property taxes and homeowners insurance are paid, the loan cannot be called due.
Myth 3: A reverse mortgage will affect my government benefits.
Fact: A reverse mortgage generally does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive would count as an asset and could impact Medicaid eligibility.
Myth 4: Reverse mortgage lenders take advantage of seniors.
Fact: Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. As a consumer, you should only work with reputable lenders. Protect yourself by conducting as much research as possible.
Myth 5: My children will be responsible for the repayment of the loan.
Fact: If the borrower or their estate wants to retain the property, the balance must be paid in full. However, as long as the borrower or their estate sells the property to pay off the debt, there is no recourse if the loan balance exceeds the home’s value at maturity. Any equity remaining in the property after the reverse mortgage is retired belongs to the borrower or their estate.
Carl Benefield may be reached directly at Pinnacle Mortgage at 985-727-0755 (extension 5).