Much as there are positive feedbacks, contradictions or myths of reverse mortgages can also be found. This is not surprising considering that what is supposedly involved with this financial program is the acquisition of monthly cash flow in addition to the monthly retirement income received by the senior citizens 62 years old and above.
So what are these misconceptions?
First is, the bank owning your home the moment you avail of the reverse mortgage loan. This is not the case. The truth is your home is yours as long as you remember these three things: you are living in it, you are paying your insurance and property taxes, and you are maintaining it in good reasonable living condition. The monthly cash flow you get from the reverse mortgage can even be used to cover those expenses.
The second misconception is the financial program as being very risky. In contrary, it is widely regarded as safe. Why? It is because it is federally protected to prevent the senior citizens from being predated and taken advantage of by the lending institutions. There are certain safeguards and strict regulations that the federal government that are placed to promote the best interest of these individuals.
It is also a common misconception that you won’t qualify if you still got mortgage balance existing on your home. Again, this is not true. In fact, if your home still has sufficient equity, you are eligible. You only need to pay off your existing mortgage balance at the closing of the loan. But then, you can also use the reverse mortgage loan to cover for that existing balance.
The next one is also a common misconception – that the reverse mortgage is taxable and affects your Medicare or social security. Not true. Why? Because the proceeds you get are not considered income but a loan. Therefore, you don’t need to worry that the loan will be reduced because of tax. It is recommended though to consult with your Medicare and social security programs to ensure you know the specific rules whether these are affected or not.
Another misconception about reverse mortgages is the false idea of owing a total more than the appraised value of your home. In fact, this will never happen because of the safeguards and protections placed on this financial program by the federal government so that your estate or home would not end up getting higher debt than its total appraised value.
When your reverse mortgage is due, your home is owned by the bank. Not true. As long as you are living in that home, you maintain its tile, and control it on your own terms. When you are out of that property though, the loan must be paid. It can be paid via a couple of ways: by selling the estate and using its proceeds to pay or by paying it through other fund sources.
Other family members will object with reverse mortgages loan because they are not comfortable with its effects. On the contrary, there are many things that you can use to help them to live their life more comfortably. An example is, with the monthly loan income, on top of the monthly retirement pension pay, senior citizens can use the money to pay for their grandchildren’s education, renovation of the house, cover for large emergency expenses, and many more.