Myth 1: If I take out a reverse mortgage loan, the lender will own my home.
FALSE. Homeowners still retain title and ownership to their home during the life of the loan. Homeowners can choose to sell the home at any time or pay off the loan, and there is never a prepayment penalty. As long as the house is maintained (home cannot be condemned by city or county) and property taxes and insurance are paid, and you comply with the loan terms, the loan cannot be called due. Furthermore, 100% of any remaining equity goes to your heirs according to your trust, will or estate plan, as long as heirs must pay off the reverse mortgage or 95 percent of the then-appraised value.
Myth 2: My children will be responsible for the repayment of the loan.
FALSE. Reverse mortgages are non-recourse loans. This means that if the property is sold to pay off the loan when the homeowner passes away or decides to leave the home for other reasons, there will be no mortgage debt for the family and heirs to repay. If the homeowner’s heirs want to keep the home, they would pay the balance in full to the lender. Otherwise, they can sell the home and keep 100% of any remaining equity.
Myth 3: I cannot get a reverse mortgage if I have an existing mortgage.
FALSE. With enough equity you may be able to pay off your existing mortgage or other debt with the reverse mortgage. The reverse mortgage loan must be in a 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 a popular reason many of our clients take out a reverse mortgage.
Myth 4: Only low-income seniors get reverse mortgages.
FALSE. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply want to be free of monthly mortgage payments or have a government-insured line of credit for the future. Without monthly mortgage payments, many homeowners find that they can maintain their existing quality of life and build their savings up to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion for future expenses.
Myth 5: If I outlive my life-expectancy, the lender will evict me.
FALSE. Reverse mortgage lenders allow you to stay in your home until the youngest borrower turns 150 years old. Since homeowners still own the property, lenders cannot evict them provided they follow program guidelines such as paying their homeowner’s insurance and property taxes.
Myth 6: Reverse mortgage lenders pressure seniors to buy additional financial products.
FALSE. Senior American Funding, Inc. has a policy to safeguard seniors from buying unsuitable financial products with reverse mortgage proceeds.
Myth 7: There are no objective advisors available to seniors.
FALSE. Borrowers are required to work with independent, third-party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This education session helps them make the right decision for their unique situations. Senior American Funding, Inc. originators pride themselves on putting our clients first.
Myth 8: There are restrictions on how reverse mortgage loan proceeds can be used.
FALSE. There are no restrictions. Cash proceeds from the reverse mortgage may be used for virtually any purpose. Many seniors have used reverse mortgages to pay off other debt, help their kids, make ends meet or have a financial reserve.
Myth 9: Reverse mortgage lenders take advantage of seniors.
FALSE. Seniors who have been victims of reverse mortgage lending schemes are extreme exceptions and typically involve unsavory lenders. Senior American Funding, Inc. subscribes to the National Association of Reverse Mortgage Lenders’ Code of Ethics. Senior American Funding, Inc. has helped more than 3,000 seniors and has never had a complaint made to the Better Business Bureau where we enjoy an A+ rating as an Accredited Member.