Reverse Mortgage Myths
Below are some of the most common myths about getting a reverse mortgage in Oregon. If you have any questions, would like more information or would like to receive a no cost proposal, give me a call at 541-773-3131 and ask for Matt Allen MLO-254296. I am happy to help in any way I can.
The Bank Owns Your Home – FALSE. You own the home. It is just like any other mortgage where there is lien against your property. You are free to do whatever you would like with the property. Sell it, refinance it, pass it on to your heirs, etc. You are on title to the home, not the bank.
Heirs Can Not Inherit The Home – FALSE. When you pass away, your estate gains control of the property. Your estate has the option of keeping and refinancing the home or selling the home. This would be the exact same as if there was a “regular” mortgage on the home.
You Can Outlive A Reverse Mortgage – FALSE. A reverse mortgage becomes due and payable once the last homeowner has moved out of the property for 12 months due to illness or has passed away and there is no spouse to maintain the property, the home is sold or refinanced or changes to title.
Social Security and Medicare Will Be Affected – FALSE. Social Security and Medicare will not be affected by a reverse mortgage. However, some need based programs such as Medicaid may be affected. You should consult with a financial advisor to see how a reverse mortgage may affect your eligibility to these programs.
You or Your Estate Could Owe More Than The Home is Worth – FALSE. The HECM reverse mortgage is a “non-recourse” loan which means that the lender cannot pursue you, your estate or your heirs for any losses associated with the loan. In the case where there is more owed on the home than what it is worth heirs can purchase the home from FHA at 95% of the appraised value if they would like to keep the home.
You Have To Own Your Home Free and Clear To Qualify For A Reverse Mortgage – FALSE. Your current mortgage and any other liens against the property will need to be paid off. But you do not have to own the home outright.
You Should Only Get A Reverse Mortgage If You Are Desperate – FALSE. In the past reverse mortgages attracted the stigma that only desperate homeowners would get a reverse loan. Today’s senior homeowners are seeing the value that a reverse mortgage brings to their lives not only from a financial perspective but also in an increased quality of life.
You Have To Be 62 Or Older To Be On The Title – FALSE. Recent changes have allowed for a “non-borrowing” spouse to be on title to the home. One of the borrowers needs to be 62 or older. But if a spouse if younger than 62 they can be on title and retain control of the property.
The Bank Can Take Your Home At Any Time – FALSE. As long as you are following the terms you agreed to, the bank can never take your home. However, if you fail to pay your taxes and insurance they can foreclose on your home just like any other mortgage loan.
A Reverse Mortgage Is Similar To A Home Equity Loan – FALSE. A traditional home equity line of credit requires you to make monthly payments a reverse mortgage does not. A bank or credit union could freeze your credit line at any time. With a reverse mortgage your credit line can never be frozen as long as you are still living in the home.
I Will Have To Pay Taxes On The Income I Receive From A Reverse Mortgage – FALSE. Proceeds from a reverse mortgage are considered “loan proceeds” and are therefore not taxable. We are not offering tax advice and you should consult your tax advisor.