Myths vs. Facts

Myth: You have to sign over the ownership of your house to the bank.

Fact: The Borrower maintains ownership of the home.

Myth: You don’t have to make any payments when you get a Reverse Mortgage.

Fact: Partially true. There is no requirement to make any payments towards the principal of the loan, however the Borrower is required to pay the taxes, insurances and any HOA Dues, if any.

Myth: You will lose all your equity in the home.

Fact: Partially true. The principal balance will increase over time if no payments are made and therefore reduces the equity in the home, assuming that the value of the home remains the same over time.  If the loan is paid off before the loan amount reaches/exceeds the home value, the Borrower or Heirs will get the remaining equity. It is not always completely lost. Additionally, the gain in property values will offset the equity loss from the increasing mortgage loan balance.

Myth: The heirs/estate will be responsible for any excess to the Bank if the loan exceeds the value of the home.

Fact: False. The Reverse Mortgage is a non-recourse loan, meaning that repayment of the Balance cannot exceed the value of the house.

Myth: When the homeowner dies, the bank will then take the house.

Fact: False. The process of repaying the mortgage loan balance is the same as if any other mortgage exists on the property. The difference is that the Reverse Mortgage has to be paid off and cannot be assumed by the heirs.  Title will get transferred to the heirs/estate through probate or other means dictated by the State, and it will be the decision of the heirs/estate how to handle the repayment of the loan, whether by cash, refinance or sale of the property. The heirs/estate also have the option to sign the property to the bank and not be responsible for any further obligation to the bank.

Maybe you have heard some things about Reverse Mortgages that you question or you are unsure about. Feel free to ask to get the facts. Click here to send us a question.