The Reverse Mortgage Specialists in the St. Louis Area

 


Top 10 Reverse Mortgage Myths

Myth 1 - Under the terms of a reverse mortgage, the lender owns the property.
This is probably the most common – and most harmful – misconception, and it prevents many would-be borrowers from even seeking information about reverse mortgages. In fact, a reverse mortgage is a loan – just like a conventional mortgage - and the borrower keeps the title to the property. Ultimately, the property may be sold in order to repay the mortgage.  You cannot lose your home under normal circumstances, but please understand foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms.
 
Myth 2 - A reverse mortgage must be repaid in monthly installments, just like a conventional mortgage.
Unlike a conventional mortgage, a reverse mortgage is repaid only when the loan is due, typically when the borrower moves out or passes away. The downside of this structure is that interest will continue to accumulate (aka increase) for as long as the loan remains outstanding.
 
Myth 3 - I won't qualify for a reverse mortgage due to my limited income
Unlike a traditional mortgage where mortgage payments must be made each month, a reverse mortgage pays you from a loan taken from your home's equity. Because of this, many seniors who do not qualify for traditional financing are eligible for a reverse mortgage.
 
Myth 4 - I must be debt free to qualify for a Reverse Mortgage
You may be eligible for a reverse mortgage if you still owe money on your existing mortgage. However, the existing mortgage balance must be paid off at closing. You can choose to pay off the balance with funds from the reverse mortgage or another source.
 
Myth 5 - A reverse mortgage will render one ineligible to receive certain government benefits.
Reverse mortgages typically do not affect entitlement programs such as Medicare. However, certain need-based government aid programs, such as Supplemental Security Income (SSI) and Medicaid, may be affected. Additionally, your eligibility to participate in any real estate tax deferral program offered by your city or county may be impacted. This information is not intended to provide any type of advice, and we recommend you consult with your Medicare, Social Security or Medicaid program administrator to determine the specific rules.
 
Myth 6 - When the home is ultimately sold (if the borrower dies/moves out), any leftover funds (after the reverse mortgage has been repaid) inure to the lender.
When the home is sold, any difference between the sale price and the unpaid balance of the reverse mortgage is distributed to the borrower, or to his heirs/estate. If the home has appreciated in the interim, this may mean that there will be a healthy surplus after such a sale.
 
Myth 7 - If I outlive my life expectancy, the lender will evict me.
Reverse mortgage lenders put no time limit on how long seniors can stay in their homes. Since homeowners still own the property, lenders cannot evict them, provided they follow the program guidelines.  You cannot lose your home under normal circumstances, but please understand foreclosure may occur if you do not pay your taxes and insurance and otherwise comply with the loan terms.
 
Myth 8 - Reverse mortgage loans are handled by the government.
Reverse mortgage loans are not a government benefit, and are not arranged by the government. The government’s role (via HUD and its subsidiary, the FHA) in reverse mortgages is to insure them against default.
 
Myth 9 - It is the responsibility of the lender to pay homeowners insurance and property taxes.
In fact, the borrower’s only financial responsibilities are to continue paying homeowners insurance, property taxes, HOA, as well as to maintain the property in accordance with the law. Failure to do so could trigger a breach in the terms of the loan, and even lender foreclosure.
 
Myth 10 - There are rules stipulating how reverse mortgage funds can be used.
Actually there are no restrictions. The cash proceeds from the reverse mortgage can be used for any purpose. It is recommended that the borrower speak to a financial advisor. Many seniors have used reverse mortgages to travel, pay off debts, make a luxury purchase or just live more comfortably.
 
 
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For more information or to apply for a reverse mortgage, call us toll-free 1-800-965-0125
Simply complete the form on the right to request a call from one of our reverse mortgage specialists.  There is absolutely no obligation for this loan consultation.
  • Turn equity into extra income
  • No monthly principal and interest payments
  • No Change in ownership - You keep the title
  • FHA-Insured
  • Typically does not affect Social Security or Medicare benefits


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