Reverse Mortgage Common Misconceptions

These are some of the common misconceptions that our Reverse Mortgage Specialists frequently hear.



1. You can't qualify for a Reverse Mortgage if you already have a mortgage on your home.

FALSE: Even seniors who have an outstanding mortgage or some other debt on their home may be eligible. These debts would be paid off by the proceeds of the Reverse Mortgage and the remainder would be available to you to use at your own discretion.

2. The bank will own my home after I get a Reverse Mortgage.

FALSE: You maintain ownership of your home just as you would if you were to take a "regular" mortgage. However if you permanently move out or the home passes to your estate, the loan must be repaid.

3. My kids will be against a Reverse Mortgage.

FALSE: We have found that children are almost always happier that their parents have found a way to be financially independent and stay in their family home. We encourage customers to invite their children to our meeting to hear all of the details. When a child hears that Mom and Dad can handle all of her expenses without becoming a burden, they immediately realize that this is the reason that you have worked all of you life to own your home.

4. Reverse Mortgages are only for the most desperate situations.

FALSE: The Reverse Mortgage is a tool used by seniors from all walks of life to enhance their retirement years, not just for those with difficult financial problems. Our Reverse Mortgage Specialists often speak with homeowners who just want peace of mind or income to enjoy their retirement years.

5. Moving to a smaller house might be a cheaper alternative.

FALSE: First, you need to review all the facts about reverse mortgages. Then you'll want to consider two important additional pieces of information:

First, to sell your home and buy a new one will probably cost you between 6% and 8%, with realtor costs and attorney fees. (The typical real estate commission of 6% on a $300,000 home would be $18,000).

Second, there really is "no place like home." No matter where you move, you will never get that wonderful feeling that you get when you walk into the room where your children took their first steps, or look over the garden that you've been tending all of these years — not to mention all of the fond memories you have of the neighborhood.

With a Reverse Mortgage, you may have the income you need to stay in your home for the rest of you life.

6. When a Reverse Mortgage becomes due, the bank will sell the house.

FALSE: A Reverse Mortgage is like any other mortgage in this regard. You retain the title; therefore it is your responsibility (or your heirs) to repay the loan. If you (or your heirs) decide to sell, that’s fine. But just as often we find that heirs find other means to pay off the Reverse Mortgage and keep the property in the family.

7. We could end up owing more than the home is worth.

FALSE: Two of the great advantages for Reverse Mortgages are that they are designed so that the borrower or their estate can never owe more than the value of the home upon repayment. In addition, the HECM products have insurance through the Federal Housing Administration (FHA), an arm of the U.S. Government. That’s the best assurance you will ever need that you or your heirs will never owe more thAn your house is worth.

8. My Reverse Mortgage might affect my State benefits or my U.S. Government benefits such as Social Security or Medicare.

FALSE: Generally a Reverse Mortgage will not affect regular Social Security payments or Medicare benefits. Remember, the proceeds from a Reverse Mortgage are a loan, so they are not treated as income.

If you are in a special program, such as a prescription or fuel assistance program, or if you have a unique situation with federal or state income programs, we do recommend that you speak with your financial advisor and the appropriate governmental agencies because different programs might have different parameters.

9. I have to use the money for certain, specific purposes.

FALSE: There are no restrictions. Many seniors have used Reverse Mortgages to travel, pay off medical debts, help their kids, pay off mortgages, or just live more comfortably.

10. I have to pay taxes on the money that I get from my Reverse Mortgage.

FALSE: All of the money you get from a Reverse Mortgage is tax-free because it is already your money. As always we have to recommend that you consult with a financial advisor.

11. I can’t use my Reverse Mortgage to buy other financial products.

FALSE: As we mentioned earlier, you can do anything you want with a Reverse Mortgage. In fact, there are special programs to protect your assets if you purchase long term care insurance. However, we do recommend that you talk to an independent advisor — not the person selling you the financial product — whenever you make this type of a decision.

Call for more information or click here and answer a few general questions to have a qualified Reverse Mortgage Specialist call you with specific answers to your specific situation. You can also use this helpful comparison chart to help with your decision.

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