The Top 8 Reverse Mortgage Misconceptions
1) I'll have to sign over the title,
and the bank/lender will own my home.
Not True.
As homeowner, you remain on the title to your home when you obtain a
reverse mortgage. The lender does not own the home, but does place a
lien against the title.
2) The bank will take my house when I
use up my reverse mortgage funds and I'll be thrown out of it.
False.
The purpose of a reverse mortgage is to help you stay in your home.
The loan does not become due until the last surviving borrower permanently
leaves the home, regardless of the balance of funds. Under the terms of
the loan, you are required to pay your property taxes and insurance and
maintain the home in reasonable condition.
3) When my reverse mortgage becomes
due, the bank/lender will sell my house.
Not True.
While repayment typically comes from the sale of the home, that's
determined by you or your estate. If the home is sold, you or your
estate pays the reverse mortgage balance and keeps any remaining funds.
4) I'll owe more than my home is
worth, passing debt onto my children.
False.
Reverse mortgages are non-recourse loans, which means the loan is secured
by a pledge of collateral, typically real property, but for which the borrower
is not personally liable. If the borrower defaults, the lender/issuer
can seize the collateral, but the lender's recovery is limited to the
collateral. Therefore, if the home is worth less than the loan balance,
you only repay the current value of the home at the time the loan becomes
due.
5) I won't qualify because of my bad
credit or lack of income.
Not True.
Income and credit scores are not deciding factors for reverse
mortgages. The lender only conducts a minimal credit check for
identity-verification purposes and to satisfy government and investor
guidelines.
6) I'm not eligible because I don't
own my home free and clear.
False.
You may qualify, even with a first or second mortgage on the home.
Any existing mortgage debt will be paid off first, with the proceeds from your
reverse mortgage. You receive any remaining funds.
7) The bank/lender will take part of
my home's future appreciation.
Not True.
Prior to HUD's involvement in the reverse mortgage industry in the late
1980s, some loans did have a "shared appreciation" clause.
However, the lenders we use do not offer any reverse mortgages with this type
of clause.
8) I don't need a reverse mortgage --
I'm not poor.
Reverse mortgages are not only for
those with financial needs, but for those who simply want to improve their
standard of living or make plans for their estate.
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Suburban Mortgage, Inc.
An Equal Housing Lender BK #010123 Lic. #206048