These are some of the most common reverse mortgage misconceptions that we see in our industry today. Some of these myths started many years ago before the HECM was revised. The industry has changed dramatically these past few years to help protect the homeowners.
Misconception • The bank will take my home from me.
Truth • With a HECM government protected reverse mortgage, the lender has no right to take the home. The homeowners will always live in the home payment free until they decide to move out or pass away. After the last homeowner leaves the home, the loan needs to be repaid within 12 months. This means your heirs have 12 months to either sell or refinance the home into their name.
Misconception • It’s an adjustable rate mortgage
Truth • The HECM reverse mortgage offers very flexible options including a fixed loan and an adjustable loan.
Misconception • I can’t pass my home on to my kids
Truth • Your heirs will inherit your home as usual. The reason this can be a controversial topic is because a reverse mortgage will add interest and mortgage insurance to your loan resulting in a slowly growing loan balance. The government guarantees that you can never owe more than what your home is worth. This means that if your kids would like to keep the home after you move out, they can refinance at the appraised value of the home at that time. If you or your heirs would like to ever sell the home, you can do so with no penalties. If there is equity in the home, all the proceeds and remaining will always go back to you or your heirs. This is a topic that needs to be thoroughly discussed with your loan officer.
Misconception • Reverse Mortgage loan proceeds/income will affect my Medicare/Social Security income.
Truth • The HECM reverse mortgage is a government program that does not impact your social security or Medicare.
Misconception • The cost of a Reverse Mortgage is too high.
Truth • This might have been true in the past but we now have options to do a HECM reverse mortgage with NO lender fees or with no closing costs at all. Points, origination fees or processing costs are no longer applicable with most reverse mortgage lenders. The only out of pocket cost to the homeowner will be to pay for the appraisal which will range in cost depending on location between $425-$550.