By: Grace Fidler
FT. LAUDERDALE – A Reverse Mortgage allows homeowners 62 years and older to convert the equity in their home to cash. The property has to be the principal residence of the homeowner.
The proceeds of a Reverse Mortgage may be received as monthly income, a line of credit or cash. There are no income or credit qualifications, no monthly payments or immediate repayment due as long as the property is the principal residence of the borrower(s).
The two most popular reverse mortgages are the Home Equity Conversion Mortgage (HECM) which is insured by the Federal Housing Administration and the Fannie Homekeeper which is sponsored by Fannie Mae. Because these mortgages are different from a traditional conventional home equity loan some concepts are unfamiliar to the homeowner, and as a result the facts for participation in one of these programs should be separated from the myths.
We have enumerated below some of the most common misconceptions concerning a Reverse Mortgage which produce confusion among seniors and/or their children.
Myth: Only single family properties qualify for a Reverse Mortgage.
Fact: Single family properties, condominiums, townhouses,
and some manufactured homes are eligible for Reverse Mortgages.
Myth: Because I am receiving funds from the lender instead of paying
a mortgage the lender will own my home.
Fact: You continue to retain ownership of your home and the
lender will not take control of the title.
Myth: I will owe money to the bank if the loan balance exceeds the
value of my home.
Fact: All reverse mortgages are “non-recourse” loans, which
mean that the borrower can never owe more than the value of the property
regardless of the loan balance.
Myth: My Social Security and Medicare benefits will be affected.
Fact: The proceeds are tax-free, Social Security and Medicare
benefits are not affected.
Myth: My heirs will be burdened with debt when I die.
Fact: Your heirs can repay the loan by refinancing the existing
Reverse Mortgage with a traditional mortgage or with the proceeds from the sale
of the home. You have up to one year to repay the Reverse Mortgage.
Myth: I must be debt free to qualify for a Reverse Mortgage.
Fact: You may have a mortgage or other debt on your home.
The mortgage or debt must be paid off with the proceeds of the reverse mortgage
first and then a determination will be made as to your eligibility for cash benefits.
Myth: I must be in good health to qualify.
Fact: A reverse mortgage has no health requirements.
Myth: I must have a steady income to qualify.
Fact: A reverse mortgage has no income or credit requirements.
Myth: It is said that only cash poor and desperate senior citizens can
benefit from a Reverse Mortgage.
Fact: Some seniors have greater needs than others for the cash or monthly income, the Reverse Mortgage can be an excellent financial estate planning tool for all seniors with considerable equity in their homes.
Myth: I will owe more taxes.
Fact: Reverse mortgage proceeds are considered borrowed funds and are therefore considered tax free proceeds.
Myth: If my loan is sold the terms will change.
Fact: The terms of your loan can NEVER change. The legal documents ensure that the terms of your loan cannot change.
Myth: I can’t sell my property so I’m stuck living in the house.
Fact: It’s your property and you may sell at any time. You will have to repay the existing balance on the reverse mortgage just as with any other mortgage.
Myth: The proceeds from the Reverse Mortgage can only be used for day-to-day living expenses.
Fact: The proceeds can be used for any purpose, even luxury items. It’s your funds to utilize as you wish.
These are some of the questions and concerns that have been routinely and regularly asked by people interested in Reverse Mortgages and these answers cannot provide all the information about the Program.
In order to fully understand how a Reverse Mortgage works, since your questions may be different and unique to a given situation, we encourage you to attend one of our seminars.
Seminars on Reverse Mortgages are held every Wednesday from 11:00 a.m. to 12:30 p.m. at Discount Mortgage Finders, 3601 West Commercial Blvd., Suite #32, Ft. Lauderdale, FL 33309. Contact: Grace Fidler, Reverse
Mortgage Specialist at (954) 816-7186.
In addition, Discount Mortgage Finders provide a wide range of mortgage