Although simple in concept—converting a portion of your home equity into cash while you continue to enjoy the comforts of
living in your own home*— certain myths and misinformation have sprung up around reverse mortgage loans. Here we address
a handful of these common mistruths:
The bank owns my home.
No. When taking out a reverse mortgage loan, you retain title to the property. The lender puts a lien onto the title to ensure repayment of the loan. This is the same for a reverse or a traditional mortgage.
I cannot get a reverse mortgage loan if I have an
No. You just need sufficient home equity for the loan to make sense.
I won’t qualify because I don’t have enough income.
No. You don’t have to earn a certain amount of money. Rather, you need to show you have the financial ability to pay your ongoing property taxes, home insurance and other property-related expenses.
The lender receives whatever money remains after the
home is sold to pay off the reverse mortgage.
No. Any leftover funds go to the heirs or the estate.
I will lose my house if I exhaust my loan funds.
No. You cannot lose your home as long as you continue to comply with your loan terms, such as maintaining your home and paying your property taxes and
I will be restricted on how I can use my reverse
No. You can use the proceeds for almost any purpose.
I will be taxed on my loan amount.
No. Because a reverse mortgage is a loan, your proceeds are not taxed. Consult your tax advisor for more information, however, as tax laws can change.
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