Myth: You immediately sign over ownership to your home.
Fact: You retain ownership of your home as long as you comply with the loan guidelines and requirements, which can include: maintaining the property, paying property taxes, homeowners insurance, flood insurance, and homeowners association dues (if applicable), and avoiding extended absences from the home longer than six months.
Myth: If you take out a reverse mortgage loan, your children will not receive any equity from the home.
Fact: While the amount of equity typically decreases over time with a reverse mortgage, it doesn’t mean there will be no equity left when the last borrower dies. The amount of equity left depends on several factors, including home appreciation, the term of the loan, and optional monthly payments. Your children may still have equity.
Myth: When you die, your children will be responsible for repaying the loan
FACT: A reverse mortgage is a non-recourse loan, meaning the lender cannot be paid more than the value of the home if the home is sold. So, even if the home’s value declines significantly, the maximum repayment amount can only be as much as the value of the home. They will not be obligated to repay the loan, but have the option of refinancing it to purchase the property themselves.
Myth: You must make monthly mortgage payments with a reverse mortgage.
Fact: While you can choose to make mortgage payments, they are not required with a reverse mortgage. The borrower is still responsible to maintain the property, pay property taxes, homeowners insurance, flood insurance, and homeowners association dues (if applicable).¹
Myth: Before you can qualify for a reverse mortgage, you must have paid off your first mortgage.
Fact: While any debt on the title of your home must be paid off at closing, as well as having adequate equity in the home, it is not necessary to own your home “free and clear” before getting a reverse mortgage.
Myth: You are not allowed to sell your home if you have a reverse mortgage.
Fact: You can sell your home if you wish and – just like any other mortgage loan – you must pay off the reverse mortgage at closing. There are also no prepayment penalties if you choose to pay off your loan early or make loan payments.
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