10 Myths About Reverse Mortgages

Eagle Home Mortgage Maurice CohnMyth #1: The lender or government will own your home.

False – You, your family and/or your estate continue to retain ownership of your home. The lender’s interest is limited to the outstanding balance of as a lien on title.

Myth #2: The reverse mortgage requires that I make monthly payments.

False – There are no monthly payments required to your lender, however, the borrower is responsible for payment of all property taxes, insurance, and general upkeep of the home.

Myth #3 – My children will be held responsible for the repayment.

False – The reverse mortgage as a nonrecourse loan. This means that the lender can only drive repayment of the loan from the proceeds of the sale of the property. Even if the value of the home is reduced due to economic market our property perils you or your estate can never out more than the value of the home, they are able to work with the loan servicer to repay the loan and as an option by the home for themselves.

Myth #4 You need a certain level of income, credit or health to qualify.

False – While a reverse mortgage currently has no income, debt ratios, credit score or health rules, you will be asked to verify income information for government monitoring and reporting purposes. Also, the lender will run credit report prior to loan approval to determine the presence of any past due federal debt, which must be brought current at the time of loan closing.

Myth #5: To qualify, my house must be debt-free and paid off free and clear.

False – You may have a mortgage or other debt liens on your home. The mortgage or debt liens however, must be paid off the proceeds of the reverse mortgage, or prior to closing with an acceptable source of funds. In fact, many borrowers obtain a reverse mortgage for this reason to be mortgage payment free.

Myth #6: Reverse mortgage lenders just want to sell your home.

False – Resvse mortgage borrowers may occupy the property as their primary residence for as long as they wish. Should they decide to sell the home, or all borrowers no longer occupy the property as their primary residence, the loan would then become due and payable.

Myth #7: If I take out a reverse mortgage, I will have nothing left for my children.

False – “Retained Equity” is a very important concept to grasp. Relize that your property will continue to appreciate (the whole value of the estate) and you pay interest only on the outstanding principal, interest and charges accrued through the payoff date. Consult your loan originator, or amortization table, for additional details.

Myth #8: If I get a reverse mortgage, I cannot sell my home.

False – If you decide to sell your home, the reverse mortgage, like any other loan, must be paid off at closing. There are no prepayment penalties for paying off or selling.

Myth #9: If my lender changes, my loan term can change.

False – A reverse mortgage is secured by two mortgages, or deeds of trust, depending on the appropriate security instrument filing in your state. One set is for the lender, and on side is retained by the the secretary of HUD. Once executed, the terms are defined and cannot be changed by law as long as the mortgages or deeds remain in force.

Myth #10 My Social Security, Medicare and/or Medicaid benefits will be affected.

False – The money from a reverse mortgage is considered borrowed money and that is not taxable income by the IRS. Consult with your tax advisory for your specific situation.


For more information contact our in-house lender Maurice Cohn

Cell 949-246-1793


NMLS # 234212 | BKBR 0117858

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