There are many misconceptions about Reverse Mortgages and how they work. If you’ve heard negative stories or myths—and have concerns—you are not alone. Most of our Reverse Mortgage clients started where you are, but have taken time to learn the truth, and the real benefits of this retirement planning option.
We want to help you get past the misconceptions, make informed decisions, and find the retirement certainty you desire.
One of the most common misconceptions about Reverse Mortgages is that the bank gets your home.
This is not true. The way in which you hold title to your property will not change with a reverse mortgage. The title designates ownership to the property, and the borrower—an individual, a couple, or a trust—holds that title. That never changes. As with traditional mortgages, the lender (or bank) is financing your home. The bank does not own your home—you do! The big difference between a Reverse Mortgage and a traditional mortgage is that you have no monthly payment requirement, which allows you to improve your monthly retirement cashflow.
Another common misconception is that you are disinheriting your kids when you get a Reverse Mortgage.
Nothing is further from the truth. Your beneficiaries will still inherit all remaining equity in the property after you have passed. In some cases the equity position when you pass may be even more than the equity you have in your home today, even after not paying the Reverse Mortgage for an extended period of time. Your beneficiaries have the option to sell the home, refinance and keep the home, or settle the outstanding loan with a lump sum payment. If there is no remaining equity in the property, your beneficiaries can walk away with no obligation.
Misconception #3: Some people think that they will have to move if the loan is “all used up.”
You will never have to move if you don’t want to. If you, like most of our clients, want to live out your life in the home you love, you can. Even if you have utilized all of the money available in the Reverse Mortgage, you never have to move. The only requirements as a borrower are to occupy the property as your primary residence and pay the on-going expenses (e.g., property taxes, homeowners insurance, general maintenance and homeowners association dues, if applicable).
You can never owe more than the value of your home.
You never want your loan amount to increase beyond the value of your house. Although that is unlikely to happen, even in extreme circumstances, if it does occur you are protected. Reverse Mortgage loans are considered non-recourse, meaning that the loan is insured for your protection and you can never owe more than the value of your home. Should your home value ever drop below the outstanding balance of the mortgage loan, the mortgage insurance will cover any shortfall. The insurance protects you (the borrower), your estate, and your beneficiaries. Beneficiaries can never inherit any debt, and the lender can never attach to any other financial assets of the estate. The mortgage insurance is a very important feature and offers borrowers security and protection from any downside in the real estate market.
You can choose to make mortgage payments on your Reverse Mortgage—or not.
A reverse mortgage is flexible and does not require you to make payments. There are reasons to consider making payments—either ongoing or for a certain time period— but every situation is unique. We can help you tailor the structure of your Reverse Mortgage to fit your specific retirement needs.