Equity Elite Buyers Guide

5 Reverse Mortgage Myths: The Facts

The bank will ownmy home.


FACT: This is one of the most common misconceptions about reverse mortgages. Just like any mortgage or home equity loan, you continue to own your home with your name on the title. As with any mortgage, you must meet your loan obligations, keeping current with property taxes, insurance, and maintenance. Reverse mortgages are designed to take advantage of retirees. FACT: Reverse mortgages are specifically designed to help retirees. Many people are living longer—and they’re rightfully concerned about outliving their retirement savings. The ability to access home equity can provide a greater sense of security and more financial flexibility. The industry is also highly regulated: Any lender offering reverse mortgages must follow strict state and federal guidelines and regulations that are in place to protect borrowers. In addition, members of the National Reverse Mortgage Lenders Association (NRMLA) pledge to uphold the industry’s highest ethical standards. I will be forced out of my home. FACT: The reverse mortgage was explicitly created to allow older adults to live in their home for the rest of their lives. You will not be evicted or foreclosed on as long as you meet the obligations of the loan. You must live in the home as your primary residence, and continue to pay required property taxes, homeowners insurance and maintain the home. If any of these obligations are not met, the loan will become due and payable. I won’t be able to leave my home to my heirs. FACT: Your heirs will still inherit your home, but they will have to pay back the loan balance if they want to keep the home; this includes the amount of funds you used plus accrued interest and fees. Or, they can sell the home to repay the loan. Once it’s repaid, they receive any remaining equity—just like a traditional mortgage or home equity loan. A reverse mortgage is a loan of last resort. FACT: Many savvy homeowners use a reverse mortgage strategically—for example, as a safety net in case of emergencies. Think of it this way: There are different types of loans for different situations and stages of life—student loans, first-time homebuyer loans—and this one is designed specifically for older homeowners and homebuyers, to give them more financial flexibility. In the past, many reverse mortgage borrowers were “house rich and cash poor.” And a reverse mortgage can be helpful to those who are in that situation. But in recent years, a lot has changed. There have been a number of product advances that have made reverse mortgages more attractive, and academic researchers at respected universities have developed effective strategies for using a reverse mortgage as part of an overall retirement plan. Today, financial advisors are increasingly viewing them as an important option to be considered.





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