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Wealth ... Senior Living

Top Ten Reverse Mortgage Misconceptions

By Rick Schluter, Reverse Mortgage Manager - MetLife Home Loans

  1. I have to sign my home over to the bank:  You keep title to your home.
  2. The bank gets my home when I die:  Your heirs inherit the home. They decide whether or not to sell the home.
  3. A reverse mortgage is only for desperate people: Some seniors do it in order to keep from losing their home, but most use it as a financial planning tool. After a lifetime of using your income to increase equity, a reverse mortgage lets you convert some of your equity into a tax-free income supplement.
  4. I don’t qualify because I have a current mortgage:  In fact, many seniors use a reverse mortgage to pay off their traditional mortgage or home equity loan.
  5. My Social Security and Medicare benefits will be reduced: Since the money comes from proceeds of a loan, these benefits will not be affected at all.
  6. I can’t afford to make any payments: You make no payment as long as you or your spouse continues to live in your home.
  7. My children could wind up owing money because of this:  By law, you and your heirs can never owe more than your home is worth, regardless of its future value.
  8. A reverse mortgage sounds risky. I could lose my home or be forced to move out: The government both regulates and insures reverse mortgages. Your responsibilities are to pay your property taxes and homeowner’s insurance. Do that, and you’re assured of remaining in your home for life, regardless of what happens to home values, interest rates, etc.
  9. I would be short-changing my children: If your heirs will need every dollar of your home equity when you pass on, then a reverse mortgage might not be the best thing to do. But if they can live with inheriting some, instead of all of your equity, you will be able to improve your quality of life now.
  10. I probably won’t qualify, due to a bad credit history:  Since you never make any monthly payments with a reverse mortgage, your credit history doesn’t matter.

This article is not meant as financial or real estate advise. Please speak with your attorney and/or financial advisor before making any financial decisions or signing any contracts.


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