Common Reverse Mortgage Misconceptions in Chattanooga, TN
There is a lot of misinformation out there, and many seniors have heard the wrong information about reverse mortgages. The good news is that we can help. We’ve assembled a list of common myths and misconceptions paired with the relevant facts. Learn what’s really going on, and be sure to contact us if you have any additional questions.
Reverse Mortgage Misconceptions and Facts
Misconception: If I get a reverse mortgage, the lender will own my house.
Fact: Just like a regular mortgage, you’ll retain ownership of your home. The loan is secured by a deed of trust or a mortgage – just like a “forward” or regular mortgage. The only difference is that you no longer have to make mortgage payments for as long as you stay on the property.
Misconception: I can be thrown out of my house.
Fact: You actually have less of a chance of being thrown out of your home if you take advantage of a reverse mortgage. You can stay in your home until you must (or choose to) move out of it by selling the home, death, etc.
Misconception: The loan might exceed the property value, and then I’ll owe more than my home is worth.
Fact: Your reverse mortgage amount will never exceed the value of your home. If for some reason the loan value happens to exceed the value of the property, the additional amount is forgiven. It will not be the responsibility of your heirs.
Misconception: The reverse mortgage proceeds will affect my Medicare or Social Security income.
Fact: Loan proceeds do not affect Social Security or Medicare benefits. This is your “tax-free” money to use as you please. However, you should consult with a professional tax advisor if you have other questions.
Misconception: My children will lose their inheritance.
Fact: Historically, homes appreciate over time. This means that a high percentage of homes are worth enough to pay off the reverse mortgage and still have some money left over. Your heirs can choose to sell the home or refinance the balance and keep any money left over.
Misconception: A reverse mortgage costs too much.
Fact: Actually, the benefits of a reverse mortgage tend to outweigh the costs. You can finance all of the closing costs, leading to no out-of-pocket expenses. You won’t have to make a monthly mortgage payment as long as the property is occupied as a primary residence. In the long term, throughout the borrower’s life, a reverse mortgage will cost about the same as a regular mortgage.