Reverse Mortgage Myths

A Reverse Mortgage is not safe.
False. Since there are no mortgage payments to make, you cannot fall behind in your mortgage payments. Consumer protections include counseling by an FHA approved counseling agency. FHA also limits the fees that can be charged. With no mortgage payments to make, homeowners can stay in their home so long as they continue to pay real estate taxes and homeowner insurance and keep their home in reasonable shape.

You Always Will Get More Money If You Wait Until You Are Older
False: If age were the only factor, more money would always be available if you wait until you are older, but age is only one of three factors (home value and interest rates are the other two) that determine the amount of money available from a reverse mortgage. Decreases in home values and increases in interest rates can substantially reduce the amount available. So it is not possible to know if you will get more or less money if you wait until you are older.

We lose title to our home.
False. You continue to own your home. Just as with any mortgage, you can sell your home or pay off your reverse mortgage at any time.

We need good income and credit to qualify.
False. There are no income or credit requirements or limitations. Any homeowner age 62 or over can qualify.
 

Our Heirs Will be Saddled With Debt
False. A reverse mortgage is a non-recourse loan. You will never owe more than the loan balance or what the home sells for on the open market, whichever is less.

We have to bring a lot of money to closing.
False. Closing costs can be financed into the loan, so you are not required to bring cash to closing. You may be required to pay up to $125 for your counseling, but you may also find a counselor that does not charge a fee or one that permits the fee to be financed into the loan. You may also be asked to pay for your appraisal, but that also many times can be financed into the loan. 

Reverse Mortgages are only for borrowers with limited income.
False. Reverse Mortgages are often used to provide additional income to homeowners with limited income, but can also provide cash for a vacation or a visit to the grandchildren and can also be an important part of an estate or financial plan.