7 Myths About Reverse Mortgages
As with many financial products, reverse mortgage loans can be complicated and there are a number of misconceptions about how the product works.
Do you know The Myths vs. The Realities?
Myth #1: The lender or government will own your home.
FALSE- With a reverse mortgage loan, you, your family, and/or your estate continue to retain ownership of your home. The lender does not take control of the title. The lender’s interest is limited to the outstanding loan balance as a lien on title.
Myth #2: A reverse mortgage requires that I make monthly payments.
FALSE– There are no monthly payments required to your lender, however the borrower is responsible for the payment of all property taxes, insurance, and upkeep of the home.
Myth #3: My children will be held responsible for the payment.
FALSE– A reverse mortgage is a non-recourse loan. This means that the lender can only derive repayment of the loan from the loan proceeds from the sale of the property. Even if the value of the home is reduced due to economic, market or property perils, you nor your estate can never owe more than the value of the home. Although your heirs will not be responsible for repayment, they are able to work with the loan servicer to repay the loan and retain ownership.
Myth #4: The home must be free and clear of any existing mortgages.
FALSE– Actually, many borrowers use the reverse mortgage loan to pay off existing mortgages and eliminate mortgage payments.
Myth #5: A reverse mortgage is similar to a home equity loan
FALSE– A home equity loan will require that you make regular monthly payments, whereas a reverse mortgage loan does not require monthly mortgage payments (borrowers must remain current on taxes, homeowner’s insurance and HOA dues as applicable).
Myth #6: Once loan proceeds are received, you pay taxes on them.
FALSE– Reverse mortgage proceeds are tax-free as it is not considered income. However, it is recommended that you consult your financial adviser.
Myth #7: Reverse mortgages can only be used as a refinance.
FALSE– Reverse mortgages can be used in purchase transactions as well. Let us show you how!
Tomasso Mortgage was established in 1989 with the goal of matching competitive affordable mortgage services with the dream of home ownership. Tomasso Mortgage has grown alongside of the community and offers a full range of loan products and mortgage services. Our staff is committed to making the process of obtaining your mortgage simple and rewarding. Trust our experience and depth of knowledge to satisfy your needs and exceed your expectations. Our vast range of products include: FHA/VA, USDA, Fannie Mae/Freddie Mac, Construction/Perm, Purchases, Refinances, Reverse Mortgages, Purchase Reverse Mortgages and 1031 Exchange Loans.
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