Reverse Mortgage Facts and Myths
There is no need to be a detective!
The badge I carry is really just a fancy pin to show that I’ve earned a Certified Reverse Mortgage Professional (or CRMP) designation. As a CRMP, I have had the opportunity to visit with many seniors and their advisors over the years and have come across many misconceptions that surface time and time again. Some of these are simply myths that been around for decades and more frustratingly is other misinformation that unfortunately comes from Loan Officers, family friends and neighbors that claim to know all about Reverse Mortgages but only have limited experience and are giving wrong info. Based on these conversations with seniors, their children and their advisors, I have compiled a list of common Reverse Mortgage Myths and Facts.
Myth #1: You no longer own your home... the Bank or Government does!
Myth #2: The home must be “Free & Clear” to qualify.
Myth #3: A good Financial Planner would advise against completing a Reverse Mortgage.
Myth #4: The Closing Costs of a Reverse Mortgage are really high.
Myth #5: You no longer need to pay property taxes.
Myth #6: If your home is in a Trust, you must remove it from the Trust to qualify.
Myth #7: Reverse Mortgages only work if you already own a home.
With no monthly payments, qualifying is straightforward. Rely on us as your local experts to learn more or to have us speak at your next function. Click here for more information.
Myth #8: My Social Security and Medicare benefits will be affected by a Reverse Mortgage.
However, if you are on Medicaid or other government assistance, speak your Medicaid Counselor or other representative to learn if your benefits will be affected. A Reverse Mortgage can still be established and will change your life, but we need to set up the loan terms carefully and can work with the Medicaid Counselor or Administrator.
Myth #9: Manufactured Homes do not qualify for Reverse Mortgages.
The double-wide home must be on a permanent foundation and there are other guidelines that apply. We have an entire web page dedicated to the intricacies and recommend you check it out. Click here to open the Manufactured Homes in Colorado page.
Myth #10: Both spouses must live in the home to qualify.
Myth #11: Reverse Mortgage proceeds are only paid out on a monthly basis.
Or, if you can’t decide… You have the option to combine the 3 methods of disbursement!
Finally, one of the greatest features about a Reverse Mortgage, is that you have the ability to make changes at any time in the future. The program is incredibly flexible and you are able to manipulate the terms after closing whenever you want.
Myth #12: Reverse Mortgage proceeds are going to be taxed.
Think of it this way… You worked hard for many years to build equity in your home. The money you used to buy your home was already taxed. So, all you are doing is pulling your own money back out of the home. Loan proceeds are not taxable, because it isn’t considered as “income”; even if you receive a Reverse disbursement each and every month.
Your situation may be unique or you may be receiving other benefits (such as Medicaid) that could be affected, so we always recommend checking with your tax, financial or benefits advisors. Rely on local experts to learn more or to have us speak at your next function.
Myth #13: Your kids (or estate) won’t inherit the home.
Myth #14: If I live longer than expected, the lender will evict me.
Myth #15: If the mortgage grows larger than the value of the home, the lender will evict me.
Simply, no one is responsible for any amount over the value of the home. If the bank takes a loss on the transaction, they submit a claim to HUD / FHA to be reimbursed.