How Reverse Mortgages Work: Reverse Mortgage Myths Explained
When it comes to reverse mortgages, people often have a lot of questions. One of the most common is as simple as, “How do reverse mortgages work?” As part of our ongoing effort to help homeowners and their families learn as much as possible before making a decision, we do our best to provide accurate, in-depth information.
There are many misconceptions about the reverse mortgage process, and plenty of myths as well. It’s important that anyone considering a reverse mortgage learns enough to be sure it’s the right choice for them.
Common reverse mortgage myths and the facts
Myth The lender takes title to the home.
Fact The homeowner remains on the title and remains the owner throughout the loan period. It’s important to note the potential risk of foreclosure if the borrower does not comply with all terms of the loan.
Myth If there’s already a mortgage on the property, the home doesn’t qualify.
Fact In many cases a homeowner can pay off a current mortgage with proceeds from the new reverse mortgage, eliminating monthly mortgage payments. The borrower remains responsible for taxes and insurance.
Myth This type of mortgage is for low-income seniors only.
Fact Homeowners across a wide range of incomes may benefit from a reverse mortgage to improve their financial situation in retirement.
Myth Excellent credit is required.
Fact Income and credit are reviewed, but the requirements are not as strict as for a traditional home loan. The purpose is to help ensure you can stay current on taxes, insurance, and maintenance throughout the loan period.
Myth You can only spend the funds in certain ways.
Fact It’s your home and your money. In most cases, the homeowner has complete discretion over how the funds are used.
Myth You have to make this decision alone, even if you don’t understand the details.
Fact Anyone pursuing a reverse mortgage is required to attend an education/counseling session — in person or by phone — with an independent, FHA-approved advisor, so the options and benefits are clearly explained.
Sharing these facts with your family?
Adult children often hear these myths from outside sources — neighbors, news articles, friends who had a different experience years ago. If your family has concerns, the best thing you can do is look at the facts together.
We’ve put together a dedicated resource for family members who are helping a parent evaluate a reverse mortgage. It covers the questions adult children ask most often, what to watch out for when evaluating any lender, and how to have a productive family conversation about retirement finances.
Go to the Family Resources HubYou’re also welcome to bring family to any consultation with Jeff — in person or by phone.
Learn More About How Reverse Mortgages Work
This only scratches the surface. If you think a reverse mortgage may be right for you, contact one of our California reverse mortgage professionals today to learn more about the requirements — and the facts.
Jeff Krolosky · NMLS #483675 · Citizens Lending Group · Anaheim Hills, OC
