The Top Ten HECM Reverse Mortgage Myths
In This Article We Will Discuss…
The Top 10 Reverse Mortgage Myths.
If homeowners take out a reverse mortgage the lender will own their home.
Homeowners still retain title and ownership to their homes during the life of the loan, and can choose to sell the home at any time. Homeowners must continue to pay taxes and insurance, live in and maintain the home
There are restrictions on how reverse mortgage proceeds may be used.
There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used reverse mortgages to pay off debt, help their kids, make ends meet or to have a financial reserve.
Homeowners cannot get a reverse mortgage if they have an existing mortgage.
With enough equity, borrowers may be able to pay off their existing mortgage or other debt with the reverse mortgage. The reverse mortgage must be in first lien position, so any existing mortgage must be paid off. Seniors who take out reverse mortgages are free to do anything they want with their reverse mortgage proceeds. Paying off an existing mortgage is the number one reason our clients take out a reverse mortgage.
Only low-income seniors get reverse mortgages.
Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans so they can have a financial cushion for future expenses.
If a borrower outlives their life expectancy, the lender will evict them.
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.
Reverse mortgage lenders pressure seniors to buy additional financial products.
We do not sell seniors any other financial products. Not every reverse mortgage lender operates that way. In fact, we have a policy to safeguard seniors from buying unsuitable financial products with reverse mortgage proceeds
There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD). This educational session helps them make the right decision for their unique situations.
The borrowers’ children will be responsible for the repayment of the loan.
Reverse mortgages are non-recourse loans. That means, if the property is sold to payoff the loan when the homeowner passes away or decides to leave the home for other reasons, the reverse mortgage debt will be paid off using the proceeds from the sale. The maximum amount owed is the current market value of the home. If the homeowner’s heirs want to keep the home, they would pay the balance in full to the reverse mortgage lender.
Reverse mortgage lenders take advantage of seniors.
Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically victims of unsavory lenders. Consumers are urged to only work with lenders who are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members and adhere to those organizations strict Code of Ethics and Standards for Trust.
Homeowners cannot always qualify for a reverse mortgage because of limited income.
Unlike a traditional mortgage where mortgage payments must be made each month, a reverse mortgage pays the borrower. Because of this, many seniors who do not qualify for traditional financing are eligible for a reverse mortgage.
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