Reverse Mortgage Myths – learn all the misconceptions of the HECM reverse mortgage, media downplays the benefits that this program can bring seniors who are “equity rich” but don’t have any cash or income. Below are the myths most people have about this loan.

The HECM program had drawn a lot of negative attention from its earlier days when it was an expensive option for seniors to release a portion of the equity – but with recent changes including the HECM Saver reverse mortgage the program is now finally shaking off it myths and misconceptions. ( no to mention the no fee reverse mortgage options )

Why are there so many misconceptions about the HECM programs:

FIrst of all the concept of how does a reverse mortgage work is strange to most since there is no mortgage payment due – this alone adds alot of confusion.

Financial advisors are mainly against this option for one simple reason – they do not make money when you get a HECM reverse mortgage – thus they are not bothered to simply tell seniors to avoid it like the plague. The media writes negatively about for much of the same reason – lack of knowledge about the works of the program, in 2012 both the media and advisors have done a much better job of presenting the information in a non biased maner.

Lack of knowledge in the retirement space for seniors – not that they are to blame as most are not taught retirement planning in college and it is a very hard subject to implement correctly – even for those who have planned for their retirement there are times when unexpected things happen which cause a financial blow. With the recent financial meltdown seniors trust levels and knowledge about retirement has been skewed since so many have lost their wealth in the collapse of the stock market, bond market, real estate market.

Reverse mortgages how they work - you can start by looking at this page to get an overview of how the program works.

• Myth The bank will own your home.
• Myth Your children will be held responsible for paying the loan back.
• Myth Reverse mortgage lenders take advantage of seniors.
• Myth You need good income and credit scores to qualify for reverse loan.
• Myth To qualify, you must own your home free and clear.
• Myth You won’t have any equity left in your home to leave for your heirs.
• Myth Once you get a reverse mortgage, you cannot sell your home.
• Myth You will see a reduction in your Social Security income.
• Myth Reverse mortgages are only for seniors that are poor.
• Myth Closing costs are way too expensive.
• Myth The loan is due and payable when the first borrower dies.
• Myth When your reverse mortgage loan is due, the lender will sell your home.

MYTH The Bank Owns Your Home

TRUTH: The bank does not own your home.

There is no difference in the reverse mortgage compared to other loans, in all cases the borrowers own and keep title to the home, but are responsible for the terms set in the contract/loan. As a reverse mortgage loan borrower you will be responsible to pay for property taxes, insurance, and maintenance on the property.

“We have to reconfirm to seniors and their kids all the time that with a HECM reverse mortgage the bank does not own your home, you keep ownership rights and you can pass the property down to your heirs or sell at any time.”

MYTH Your Children Will Have to Pay Your Loan

TRUTH: Your Heirs are not mandated to pay back any of your loans including the reverse mortgage, they can if they choose to buy the property ( they can use a mortgage if the like does not have to be paid with cash).

Any equity which is left after the sale of the property will belong to your children and not the bank – this myth bank owns my home – well no the bank does not own your home and your kids wont have to pay anything back.

“Our clients are very concerned with leaving behind their kids/estate some equity or a property, the HECM reverse mortgage will not be paid back by your children unless they want to keep the home ( at that time they can sell or refi) any equity which has built up will belong to them ( or whoever you leave the property to).”

MYTH To Qualify You Need Good Income & Credit Scores

TRUTH: You don’t need to have a good credit history or income for a HECM reverse mortgage, this program was designed so seniors who don’t have either can qualify as long as they meet the basic requirements.

Qualifications that matter to reverse mortgage lenders

• must be 62 or older
• must own a primary residence and live in the home
• you must have equity in the property
• never have defaulted on government debt

“FHA is a government body that insures these  mortgages, seniors do not have to worry about having income or high credit scores to qualify for this mortgage. Unlike traditional forward refi, if you meet the above requirements then you will receive a reverse mortgage loans, and the best part is that there are no monthly payments.”

MYTH You Must Own Home Free and Clear

Myth:  To qualify, you must own your home free and clear.

TRUTH: You can have a mortgage on the property just as long as there is enough equity to pay off the mortgage and to give you the money you are requesting (either lump sum, monthly checks, or line of credit).

The more equity you have and the older you are the better or the more likely you are to receive a reverse mortgage loan.

“If you have a home that is paid off you are ahead of the crowd, many seniors well into their 70′s are still paying for a mortgage, with the HECM reverse mortgage you can still qualify even if you currently have an existing mortgage.

MYTH Closing Costs Are Way Too Expensive

Myth:  Closing costs are way too expensive.

TRUTH: Reality is that the closing costs have substantially dropped and with the new HECM Saver reverse mortgage closing costs are very doable.

The standard HECM reverse mortgage has an insurance premium of 2% upfront which adds to the cost of the loan, the overall fees of the reverse mortgages cannot exceed $6,000. The fees to the reverse mortgage are very similar to the costs of any mortgage, you need to do comparison shopping in order to save money.

“Our company is responsible for comparison shopping your reverse mortgage loan across top lenders and banks, in order to secure you the best interest rates, closing costs, and closing time.”

MYTH You Wont Have Any Equity Left in the Home For Heirs

The best way to make sure there is abundant equity left for your heirs to use as little equity as possible ( this can be accomplished if you have a steady income, or a large savings) most likely you have entered retirement and are depending on social security checks. Most seniors are in a position where the costs have gone up so much, but their income is not going up (social security), seniors are having to help their grown kids, while worrying about their homes equity.

Most likely home prices will keep falling another 10-15% as we still have many foreclosures to go through, also many adjustable rate mortgage will adjust in the years to come. With this we should explain that a reverse mortgage can be viewed as an insurance policy, since you will receive a lump sum or your proceeds upfront, if home prices go down substantially or just enough you wont have to worry about loosing all of your equity.

Myth When your reverse mortgage loan is due, the lender will sell your home.

When the HECM reverse mortgage loan becomes due, you or your heirs will decide how to pay off the loan. You or your heirs can keep the home and use funds from elsewhere to pay off the full outstanding balance, or you can sell the home and use proceeds from the sale to pay off the loan. If you are able to sell your home for more than the loan balance, you or your heirs keep the difference.

“Media gets this wrong all the time, the reverse mortgage is not the problem but a solution, the problem is that seniors go into to retirement without being prepared for all of the expenses that comes with aging. The HECM reverse mortgage helps seniors who are not able to have a standard quality retirement by allowing them to access the homes equity without having to make monthly mortgage payments.”

to learn more visit:

reverse mortgages how they work
reverse mortgages pros and cons
reverse mortgage information
what is a reverse mortgage
reverse mortgage calculator
reverse mortgage rates

REVERSE MORTGAGE MYTHS | MYTHS HECM REVERSE LOAN 2012 By Paul Galante – Add me to your circles