Top 10 Reverse Mortgage Loan MYTHS
I am unable to get a reverse mortgage due to my current mortgage.
Fact: Most seniors who get a reverse mortgage do indeed have an existing mortgage. All that happens, is that the proceeds from your reverse mortgage must first be used to pay off your current loan amount. For example, if you qualified for $300,000 from your reverse mortgage, but had a loan amount of $100,000 you would end up with $200,000.
The Bank can take my home if I have a reverse mortgage.
Fact: A reverse mortgage doesn't affect your ownership of your home. You maintain the title to your home throughout the life of the loan, and are free to sell your home at any time, just like you normally would. As with any home loan, you must comply with loan terms which will be clearly explained.
I can only use my reverse mortgage proceeds on government endorsed products.
Fact: This is absolutely false. 100% of your reverse mortgage proceeds can be used on whatever you, as a responsible senior deem appropriate. Whether you use the cash you receive to remodel your home, pay for doctor bills, or simply stuff the cash under the mattress for a rainy day, the government has no say in what you do with your money.
Reverse Mortgages are only for those in dire financial stress.
Fact: As outlined in one of our blogs, the reverse mortgage is not a loan of last resort. It is a viable, and lucrative retirement strategy. Here at Aramco Financial most of our clients who find reverse mortgage beneficial to them are financially secure. Although the Reverse Mortgage helps many seniors who are on the verge of bankruptcy or default, many of our clients have hundreds of thousands of dollars in the bank, and are simply looking to grow their estate or create an additional safety net for their retirement.
If I live too long, the bank will kick me out of my house.
Fact: As mentioned in myth number two, you maintain complete ownership in your home over the life of your loan. As long as you continue to live in your house, and stay current on your property taxes and insurance and maintain the home as you always would, the bank has no right to remove you, the rightful owner of your house.
The proceeds I receive from a Reverse Mortgage will affect my government benefits.
Fact: We cannot represent there will be no effect on public benefits as a result of taking a reverse mortgage. Need-based benefits such as Medicaid and SSI may be affected. The general answer to this question is that no, a reverse mortgage will not affect government benefits such as Medicare or Social Security. That being said, if you are on Medicaid we recommend that you consult your federal benefits administrator as well as your financial planner or advisor to ensure that your increased assets won’t disqualify you from Medicaid. Of course in some cases certain government benefits can be affected, so be sure to disclose when researching your reverse mortgage
It’s impossible to find an objective advisor who can tell me if a Reverse Mortgage is right for me or not.
Fact: Before the reverse mortgage process can even begin, you are required to consult a counselor approved by HUD(Housing and Urban Development). These often times over-the-phone consultations provide seniors the chance to speak with someone who is completely unbiased and educated in regards to the reverse mortgage product.
If I get a Reverse Mortgage, I’ll be burdening my children with the repayment of my loan.
Fact: The Reverse Mortgage is a non-recourse loan, which means that if the loan amount exceeds the value of the home and the estate sells the property, the estate does not owe more than what they sold the house for. If the estate decides to retain possession of the property the loan amount must be paid in full, at which time any remaining equity would transfer to the estate.
As a senior I will be taken advantage of by a Reverse Mortgage lender.
Fact: Of course no matter how tightly regulated an industry is, there will always exist a few “bad apples,” or in this case predatory lenders. At Aramco Financial we are not only members of the National Reverse Mortgage Lender’s Association(NRMLA), but we have also taken an additional step to obtain the designation of CRMP or Certified Reverse Mortgage Professionals. Our broker, Mehran Aram CRMP is one of just over a hundred CRMPs nationwide, and the only Certified Reverse Mortgage Professional to exclusively serve California homeowners. This CRMP certification ensures the highest level of ethics, experience, competency and customer service.
I don’t have enough income to qualify for a Reverse Mortgage.
Fact: The reverse mortgage is very different than a conventional mortgage. There are no rigid credit qualifications, nor is income normally an issue with qualifying a senior for a Reverse Mortgage. The main qualifying factors are: age (62+), equity, and ownership of your home.