As with many financial products, you may have heard a number of misconceptions about reverse mortgages and how they work. Do you know the Myths vs. the Realities?
Myth No. 1 The lender owns the home.
You will retain the title and ownership during the life of the loan, and you can sell your home at any time. The loan will not become due as long as long as you continue to live in the home, maintain your home and pay your property taxes and homeowners insurance.
Myth No. 2 The home must be free and clear of any existing mortgages.
Actually, many borrowers use the reverse mortgage loan to pay off an existing mortgage and eliminate monthly mortgage payments.
Myth No. 3 Once loan proceeds are received, you pay taxes on them.
Reverse mortgage loan proceeds are tax-free as it is not considered income. However, it is recommended that you consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
Myth No. 4 The borrower is restricted on how to use the loan proceeds.
The funds from the reverse mortgage loan can be used for any reason. Many borrowers use it to supplement their retirement income, delay receiving social security benefits, pay off debt, pay for medical expenses, remodel their home, or help their adult children. You have worked hard for this asset and prudence along with budgeting should be the proper approach to enjoying proceeds received from your reverse mortgage.
Myth No. 5 Only low income need reverse mortgages.
Many affluent senior borrowers with high dollar homes and healthy retirement assets are using reverse mortgage Line of Credit feature as part of their financial and estate planning. We work closely with financial professionals and estate attorneys to protect your estate and enhance your overall quality and enjoyment of life.