Myth or Fact? Unveiling the Truth Behind 5 Common Misperceptions About Reverse Mortgages

Depending on who you’re talking to, you’ll probably get a different perception about reverse mortgages – just like with almost anything else in life. Unfortunately, not everyone is a practicing mortgage agent, so it’ll take some due diligence to sift through all the information you may come across, and determine what is fact and what is no more than a myth.

A reverse mortgage is a type of home loan that is available to homeowners who are 62 years or older, and basically lets them to convert part of their home equity into cash.

Here are 5 of the most common myths associated with reverse mortgages, and the truth behind them.

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MYTH #1 – You still have to make monthly payments on your loan

TRUTH – You really don’t have to make regular monthly payments towards your reverse mortgage, as long as you’re still living in your home. Aside from property taxes and home insurance, there are no other fees tied to a reverse mortgage during your residency.

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MYTH #2 – You can’t sell your house if you have a reverse mortgage on it

TRUTH – Of course you can! Your name is still on title, right? If so, you can sell your home any time you want, or make any updates or changes to it as long as you’re still living in it. Actually, lots of home owners take out a reverse mortgage specifically to pay for renovations on their homes!

 

MYTH #3 – Your kids are going to have to be responsible for paying off your loan

TRUTH – Your kids – or whoever your heirs to your estate happen to be – have the choice to walk away from the loan and leave it to the lender to deal with the repayment issues. A reverse mortgage is a government insured loan, which protects your heirs if can’t seem to get rid of the reverse mortgage yourself. Not only that, but they can also choose to sell the house, pay the loan off, and pocket any profits made if the home sells for more than the loan was worth.

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MYTH #4 – A reverse mortgage is a last resort to deal with financial woes

TRUTH – Actually, tapping into a reverse mortgage is a great way for seniors to pad their retirement funds, and help make their golden years much more enjoyable with the freedom that more cash brings. This type of loan is often used as part of a financial plan, not necessarily a last ditch to get you out of a financial bind.

 

MYTH #5 – You risk losing Social Security and Medicare

TRUTH – Reverse mortgages have zero effect on your Social Security and Medicare; however, they can affect needs-based programs such as Medicaid. If you want to keep your Medicaid benefits, you’re going to have to do something about your monthly withdrawal payments so that your income doesn’t go over your Medicaid limits. If the government sees that your income is enough to cover such needs, you could be saying bye-bye to this coverage.

 

So there you have it. If you qualify for a reverse mortgage, it might be something you want to take advantage of without having to worry about some of the silly myths floating around out there, inevitably deterring you from making that decision. Of course, you’ll want to speak with a financial advisor first to make sure if it’s the best move for you before you sign on the dotted line.

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