Home Equity Conversion Mortgage Myths - A Closer Look at Common Misconceptions
Myth #1: The lender or government will own your home.
FACT: You or your estate continue to retain ownership of your home's title. The lender does not take control of the title. The lender's interest is limited to the outstanding loan balance as a lien on the property.
Myth #2: My children will be held responsible for the repayment.
FACT: The reverse mortgage is a non-recourse loan. The lender can only derive repayment of the loan from the proceeds of the sale of the property.
Myth #3: To qualify my home must be debt free and paid off "Free & Clear".
FACT: You can have a mortgage or other debt on your home's title as long as you have adequate equity in the property.
Myth #4: Reverse mortgage lenders just want to sell your house.
FACT: You may remain in the home for as long as the terms are met. Should you decided to sell the home or move out, the loan would then become due and payable.
Myth #5: If I get a reverse mortgage, I cannot sell my home.
FACT: The reverse mortgage is like any other loan. If you sell your home, that reverse mortgage will be paid off at closing. There are no prepayment penalties for paying off or selling the home in advance.
Myth #6: If my spouse dies or must go into assisted living, I have to sell my house.
FACT: With the new reverse mortgage the non-borrowing spouse can stay in his or her house for the rest of their life.
Myth #7: You pay taxes on the loan proceeds from a home equity conversion mortgage.
FACT: The money from a HECM comes form your home's equity, which already belongs to you, so it is not considered income.
Myth #8: There are huge fees associated with Home Equity Conversion Mortgages.
FACT: The fees associated with a HECM are similar to a regular mortgage, but can be rolled into the loan.
Myth #9: I won't qualify for a home equity conversion mortgage because I am on a limited income.
FACT: Many seniors who don't qualify for a traditional mortgage because of lack of income don't have the same issue with a HECM.
Myth #10: There are restrictions on what you can use your loan proceeds on.
FACT: After existing mortgage or lien has been paid off, the net proceeds of a HECM can be used for any reason.