8 Common Misbeliefs About Reverse Mortgages Exposed

The internet is a great resource for learning about reverse mortgages and connecting with other borrowers to hear their stories, which can help you make smarter choices. But with so much misinformation online these days, it's easy to get confused.

There are a bunch of myths out there that hide the real benefits of reverse mortgages. But don’t worry, for today, I’ll be your pal and debunk all the common misbeliefs about reverse mortgages.

What’s The Fuss About Reverse Mortgages?

They have gained popularity, especially among seniors who are gearing up for retirement. It offers them a way to supplement their income, cover unexpected expenses, or fund healthcare needs.

With the rising costs of healthcare and living expenses, many retirees are turning to reverse mortgages as a means of securing their financial future.

But, since there is a lot of false information spread across the internet, it’s important to ensure that your decisions are based on reliable and accurate sources.

8 Reverse Mortgage Myths Exposed

Now, it’s time to break down all the common myths you’ve heard so far! Get ready!

Myth 1: You Lose Your Home When The Lender Takes Away The Title

• There’s no such thing as losing one’s home or the lender taking your title away. While entering a reverse mortgage, your name is still on the title, the house belongs to you and your lender can’t take away your house without any justifiable reason.

• In simple terms, as long as you follow the reverse mortgage rules of the loan agreement, you won't be forced to sell your home and move out. These rules include living in the house as your main home, taking care of the property, and paying for things like property taxes and insurance.

• That being said,you don’t lose your home. You only need to repay as prescribed on your loan terms.

Myth 2: Your Heirs Can’t Have Your Property

• If this is what you believe, there’s been a huge misunderstanding! Your home is an appreciating asset and there's a chance that the value of your property will increase during your lifetime.

• While interest accumulates on the remaining loan amount and gets added to the balance, the difference between the home's value and the loan balance known as retained equity could still be available to pass on to your heirs.

Myth 3: You Have Limitations On How The Funds Are Being Used

• That is not at all true! You can spend the proceeds from your reverse mortgage however you want. No one can limit you to using it only for healthcare or day-to-day expenses.Want to buy a second home? Sure, it's possible.

• Neither lender restrictions nor state policies can limit your use of funds. However, make sure you don't overuse them or use them for purposes that don't benefit your lifestyle in any way.

Myth 4: Your Children Are Forced To Repay The Loan

• FYI, reverse mortgages are non-recourse loans. If the person who took out the loan passes away, their family or heirs won't be responsible for paying off the loan from their own money.

• This means that if the borrower's family inherits the house and the loan balance is more than the house is worth, they won't have to pay the extra money. It's like a safety net to make sure they don't end up owing more than the house is valued.

Myth 5: You Need To Be Completely Free From Debts To Qualify

• Many people think that if they already have a mortgage on their home, they can't qualify for the best reverse mortgage terms. But that's not true! You can still get a reverse mortgage even if you have an existing mortgage.

• It's a good idea to talk to a HUD-approved lender and a financial advisor or lawyer to see if a reverse mortgage is right for you and your financial situation. They can help you understand all your options and make the best decision for your needs.

Exclusive today: HUD-approved lenders share insights!

Myth 6: You Have To Pay Monthly Mortgage Payments

• It’s the lender who pays you and there’s no need for you to pay any monthly mortgage payments as long as you follow the loan rules. These rules include paying property taxes, home insurance, homeowner's association dues, and taking care of your home.

Calculate how much you can receive from a reverse mortgage

• If you want, you can make payments to lower the loan amount, but it's your choice and not a compulsion. The loan doesn’t need to be repaid until you leave the home permanently or fail to meet the loan rules mentioned above.

Myth 7: It’s Only For Seniors Who Have Low-Income

• It can benefit them the most but is common to seniors of all income levels. Anyone aged 62 and above can use it as a safety net for unexpected bills or to have extra cash in retirement. Some also use it to enjoy retirement more comfortably because a reverse mortgage increases their cash flow.

• So, a reverse mortgage isn't just for one type of person or situation. It's for any senior who wants to make the most of their retirement.

Myth 8: You Can’t Sell Your Home While The Reverse Mortgage Is Active

• Just like other loans, when you sell your home while on a reverse mortgage, the balance will be paid off when the sale is finalized. Most importantly, there are no penalties for paying off the loan in advance or selling the reverse mortgage home early.

• Whether you choose to downsize, move to a different location, or simply decide to sell, you have the freedom to do so without any obstacles from your reverse mortgage. You retain full control over the sale of your property. But don't forget to discuss your sale decisions with your lender.

• Achieving financial freedom during retirement begins with proper financial planning. It’s true that a reverse mortgage may not be suitable for everyone, but it proves to be a valuable part of the overall retirement plan for many seniors.

Summing Up: Best Reverse Mortgage Practices

First and foremost, it's crucial to thoroughly understand the terms and implications of a reverse mortgage before proceeding. Keep up with regular maintenance of your home and stay current on property taxes and insurance to safeguard your equity.

Finally, maintaining open communication with your lender throughout the process can help address any concerns and ensure a smooth experience. By adhering to these best practices, you can maximize the benefits of a reverse mortgage while minimizing potential risks.