Common Reverse Mortgage Myths

Reverse Mortgages are revolutionizing the way seniors are securing financing. While HUD's Reverse Mortgage is a safe and federally-insured program that gives older Americans greater financial security, many seniors have received false information.

Listed below are the top Reverse Mortgage Myths and Misconceptions:

1. The bank will own my home.

Answer - The homeowner always retains title to the property and can choose to sell the home at anytime. There are no prepayment penalties or restrictions of any kind. The lender’s interest is limited to the outstanding loan balance and they do not take control of the title.

2. My children will be held responsible for repayment of the Reverse Mortgage.

Answer - The Reverse Mortgage is a non-recourse loan. This means that the lender can only derive repayment of the loan from the proceeds of the sale of the property.

3. To qualify, my home must be paid off "Free and Clear!"

Answer - You may payoff a mortgage or equity loan with a Reverse Mortgage. In fact, many people get a Reverse Mortgage for this reason: to get rid of their monthly payments forever.

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

Answer - A Reverse mortgage has no income, credit, or health requiements.

5. If I get a reverse mortgage, I cannot sell my home

Answer - If you decide to sell your home, the reverse mortgage is like any other loan that must be paid off at closing. There are no restrictions on prepayment or penalties for paying off your loan or selling your home.

6. "I can be evicted from my home."

Answer - Taking a reverse mortgage does not mean you are going to be forced from your home; you leave your home when you choose. A reverse mortgage loan is not due and payable until the home is no longer occupied as your primary residence. Until then, you live in the home, make no monthly mortgage payments, and use loan proceeds in any manner you choose. Even if you have used all of the funds available, you do not have to leave or sell the home. However, you are required to keep your home insured, pay your property taxes and maintain your home. You can use the proceeds from the loan to do so. Failure to meet these obligations could result in a default on your loan and possibly even foreclosure or a tax sale, so it is very important you understand and plan for these requirements.