California Reverse Mortgages by your Sacramento Reverse Mortgage Provider

Reverse Mortgage Urban Legends And Myths?

by Zachary Scott
Sep 21, 2009

There is so much bad information and misconceptions about what is a reverse mortgage that they take on a life of their own and become urban legends and myths. This myths cause good people to miss out on a great opportunity. In addition the reverse mortgage gets a bad rap because of the products that are sold in conjunction with the reverse mortgage. Yes there are side effects to everything we do but the cure may be worth it.

Below are some of the the most common myths I hear when I am out talking to my clients.

Shedding light on these urban legends and myths will give you a new perspective on this great opportunity and give you the confident to access some of the wealth you have accumulated over the years.

The Reverse Mortgage Lender owns my home!

No! You maintain your home as long as you continue to use it as your primary residence. The lender only gets paid when you leave the home, at which time it may go to your estate. Your estate may refinance the reverse mortgage, or just simply give it back to the lender, letting the lender dispose of the home. Any moneys above what is owed on the note will go back to your estate.

If the loan amount exceeds the value of the home I will owe more money!

No! You can never owe more than the value of your home. Reverse mortgages are Non-Recourse loans meaning the balance due will never be more than the value of the home, regardless of the amount borrowed.

My Social Security, Medicare, Medicaid and other benefits will be affected!

No! A reverse mortgage does not affect benefits earned by seniors so long as the funds are not accumulated. Programs vary by state and specific dollar amounts vary also and you can check with your local “Agency on Aging”, or similar organization.

My heirs are burdened

No! Actually by replacing or using the reverse mortgage over a traditional mortgage or refinance will unburden your heirs from having to make house payments and risking foreclosure. In addition, once you vacate the house, the heirs have the choice of selling, refinancing or walking away from the home without any obligation or penalty in which they would be held personally responsible for. Generally the lender gives a six month reprieve plus two 90 day extension before taking any action. Should the lender have to take the home back and foreclose upon it, the heirs are not held responsible for any funds that may not cover the balance.

I must be debt free to qualify for a Reverse Mortgage

No! You may have a mortgage and other debts on your home as long as these debts can be paid off with some or all of the proceeds of the reverse mortgage and/or other available funds.

I must be in good health to qualify

No! Reverse Mortgages have nothing to do with your health and there are no health requirements

I need to have good income and credit to qualify

No! A reverse mortgage loan has no income or credit requirements and will help by giving you more cash flow, it may even make your credit better if you payoff any high interest balances.

Only cash poor or desperate seniors can benefit from a Reverse Mortgage

No and this is the biggest missed opportunity for regular seniors! Because there is virtually no restrictions on how the funds can be used from your reverse mortgage, all seniors will benefit by accessing an asset that is dormant without risking losing that asset because of tradition borrowing and lending but this all really depends on your goals.

I will owe Taxes on the Income

No! Money received from a reverse mortgage is classified a loan and not as income so you are not taxed but ask your tax professional if you are still unsure.

It is going to cost a lot of money

Not Really! If you are going to borrow money from any source available then you are going to have to pay for the use of that money so the cost really comes down to the difference between the other sources. If you would to find out if it makes sense to do the reverse mortgage use the form on the right or…

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