Common Reverse Mortgage Myths Debunked

Reverse mortgage concerns often lead to them being misunderstood altogether. In an attempt to debunk common reverse mortgage myths, we address them below.

Myth: Only those who’ve paid off their existing mortgage can qualify for a reverse mortgage.
The Truth: Even if you have an existing mortgage balance you may qualify for a reverse mortgage loan. However, you will need to pay off the existing mortgage loan at or prior to the closing of your reverse mortgage loan. You will be able to use the proceeds from your reverse mortgage to do this.

Myth: The lender owns your home when you get a reverse mortgage.
The Truth: As long as you occupy your home as your principal residence, maintain the property to FHA standards, pay property taxes, homeowner's insurance and meet the other program requirements of the loan, you will continue to own your home.

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

Myth: Reverse mortgage loan adversely affects Social Security and Medicare eligibility.
The Truth: For the most part, a reverse mortgage loan won’t affect these programs, but is possible that eligibility for Supplemental Security Income (SSI) and Medicaid could be affected. We suggest you contact the program administrator in your area regarding your specific situation.

Myth: If you pass away, the heirs to your house will be responsible.
The Truth: If the heir is not already a co-borrower on the loan and wants to retain the property, the loan balance must be paid in full. If the estate wants to retain the property, the loan balance must be paid in full.

Myth: A good credit score is a prerequisite for being eligible for a reverse mortgage.
The Truth. Reverse mortgage lenders consider the value of your home and other criteria, but generally not your credit score. Depending on the reverse mortgage product you choose, a credit score may be used in the underwriting process.