Special offer

Still the most common Reverse Mortgage myths.

By
Services for Real Estate Pros with Southwest Florida Notaries (Mortgage Notary Signing Agent)

Virtually ever time I read something about Reverse Mortgages, one of the most common things I see is the need to dispel the common myths.  It seems these myths still persist, even with all the knowledge out there.  I even had a conversation with my mother recently, and I think she realized she thought those same myths existed and were true.  The best thing you can do for anyone over 62, is EDUCATE them about ALL aspects of a Reverse Mortgage.  No they are not for everyone, but for many, they can provide enormous benefits!  About those common myths,

  • Myth - the bank takes title to the home.  Reality - YOU own your house, just like any other mortgage.  It IS a mortgage, and lien on your home.  Having one or ten or a hundred liens on your home, YOU still own your home!
  • Myth - When there is no more equity, the lender will force you out of your home.  Reality- no matter if you live to 150 and the loan exceeds the home value by triple, you REMAIN in your home as long as you want and are able.  Once you leave, by death, moving in with relatives to help with health issues, or nursing home, etc., the loan becomes due, and either you or your heirs can take out their own financing to pay for the mortgage or put the home up for sale.  IF the balance exceeds the home value, the mortgage insurance that is required on all Reverse Mortgages will make up the difference between the two values.  This is a very important safeguard that is so important, and fortunately required.  It does boost the closing costs for the loan, but when you consider the benefits, it is well worth the cost.
  • Myth - To pay for the loan, you must sell the home.  Reality - While many do in fact sell it, it is your (or your heirs) CHOICE to sell or obtain other financing to keep the home in your family ownership.
  • Myth - If the loan exceeds the home value, your heirs could end up needing to sell other property or be burdened with an excessive loan.  Reality - As mentioned about, the Mortgage Insurance required on all loans will take care of the balance exceeding the home value if this occurs.  The ONLY thing that can be used to pay for the loan balance is home itself, and the mortgage insurance.  Nothing else can or will be used to pay this balance, and NO heir or your estate will need to make up this difference.
  • Myth - Low income or bad credit will prevent you from being approved.  Reality - Steps will be taken to identify you and meet government regulations, but income and credit have no bearing on the approval process.  If you are in bankruptcy, it will delay your ability to get the Reverse Mortgage until after the bankruptcy is discharged, but it will not prevent you qualifying.  If you are in foreclosure, that will actually help speed your approval process as you are moved to the top of the applicants to stop the foreclosure.
  • Myth - You need to own your home free and clear with no liens to qualify.  Reality - While a certain amount of equity is required (varies depending on several factors, but a good rule of thumb is at least 30 - 40% equity) it is not necessary to own your home free & clear.  ALL liens MUST be paid off prior to or at closing of the Reverse Mortgage as this must be the first and only lien when put on the home.
  • Myth - The lender will take some of the appreciation or equity over and above the loan.  Reality - While some of the original private Reverse Mortgages had this provision, HUD does not allow this on any HUD back Reverse Mortgage.  Make sure you are using a HUD backed Reverse Mortgage Program Loan!
  • Myth- A reverse Mortgage is only for the poor. Reality- While the poor are the most common borrowers with Reverse Mortgages, even if you are wealthy, it can be a part of your financial planning so that if something were to change in your finances, you are not suddenly in the position to deal with it and be stressed by this sudden need.  All income from a Reverse Mortgage is tax-free because you have already paid taxes on this money.

If you know anyone over 62, as I said, EDUCATE them about Reverse Mortgages.  If they do not want it, great, but if they could use the financial relief, point out all the tremendous benefits!

===============================================================================

Title companies & mortgage brokers, help your borrowers- arrange to have their loan signed and notarized in their home, at their convenience by a Certified Notary Signing Agent (CNSA)

Browse The Rain for a qualified and Certified Notary Signing Agent in your area.

Business Card  View my Active Rain Profile

Southwest Florida Notaries is open for your mortgage closing 24/7 at your location (Based in Murdock, FL, near Port Charlotte FL, but covering all of Southwest Florida - Manatee, Sarasota, Charlotte, Desoto, Lee and Collier counties)

I would be glad to have you add me as your associate

Subscribe to my blog

Comments (0)