Myths and Misconceptions

YOU will retain the title and ownership during the life of the loan, and you can sell your home at any time (at which time the loan becomes due and payable but then you, or your heirs/estate will receive the net proceeds from the sale). The loan will not become due and subject to repayment as long as you continue to meet loan obligations such as living in the home as your primary residence, maintaining the home according to the Federal Housing Administration (FHA) requirements, and paying property taxes and homeowners insurance.

Generally, money received is not considered income and should be tax free, though you must continue to pay required property taxes. Consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.

Actually, many borrowers use the reverse mortgage loan to pay off an existing mortgage and eliminate monthly mortgage payments. The ability to extinguish your existing mortgage and eliminate your current principal and interest monthly payments will depend on the FHA Reverse Mortgage formula which depends on the value of your home, the youngest persons age on title and the CMT T-Bill interest rates.

Once any existing mortgage or lien has been paid off, the net loan proceeds from your 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 numerous other choices (see our “Great Uses” section for other ideas). 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 loan for longevity of a secure and stress-free retirement.

This is a big misconception. Many affluent senior borrowers with multi-million dollar homes and healthy retirement assets are using reverse mortgage loans as part of their financial and estate planning, and are working closely in conjunction with financial professionals and estate attorneys to enhance the overall quality and enjoyment of life. Most other Reverse Mortgage Borrowers are average to middle class homeowners that utilize this program as an additional asset to prudently leverage to enhance, or secure their retirement years.

As long as the borrower(s) meet the requirements of the loan, they cannot be forced out. Borrower must occupy the home as their primary residence and remain current on property taxes, homeowner 's insurance, the costs of home maintenance, and any HOA fees. This is a FHA Guarantee and does not change regardless of the Real Estate market value of the home nor change in interest rates after the loan is initially closed. No worries about market fluctuations affecting the guarantees of this program.

If the spouse, partner or significant other are not on title they simply will need to purchase the home via numerous financing options on the market, or look into taking out a Reverse Mortgage in their name to payoff the existing one. ONLY If the borrower no longer meets the requirements of the loan such as the home is no longer their primary residence, they've passed away, or are not making the required payments of Property Taxes, Insurance, HOA fees, Maintenance (see myth 6), does the loan need to be satisfied. 

The loan is a NON-RECOURSE loan!. The home is the only asset the lender can pursue to repay the principal loan balance (PLB). The repayment amount can never exceed the home's value (at the time of repayment) thus the borrowers estate, assets or other properties cannot be affected.

With a reverse mortgage, you can still leave your home to your children. The Title will pass to your Estate, ALONG with any equity in the home, and the estate is allowed to sell the home and receive the proceeds, or purchase the home along with paying off the current HECM balance, using any chosen selling or financing options available to the Estate. These are non-­recourse loans.

The lender puts no time limit on how long you can stay in your home Regardless of your age, time in home, or how market values or interest rates vary. You still own your home, and are required to maintain your home and pay the property taxes, insurance, and any HOA fees, as with any mortgage.

With a HECM loan:

• Your existing monthly mortgage payment of Principal and Interest is eliminated
• You stay in your home and maintain the title
• Loan proceeds are not taxed as income and can be used any way you choose
• You’re Protected - A HECM loan has built in safeguards that protect you and the home and are FHA insured. You are always protected against lender insolvency and will continue to have access to your available equity.

To be eligible for a HECM loan, some key requirements are:

• At least one of the owners on Title must be 62 years of age or better
• Your home must be your primary residence and have sufficient equity
• You cannot be delinquent on any federal debt
• Property must be a single family residence, an owner occupied, SFR, 2-4 unit home, a condominium approved by the Department of Housing and Urban Development (HUD), or a manufactured home that meets FHA guidelines
• Must meet financial assessment requirements as established by HUD

• With a fixed-rate HECM loan, you can receive the cash in a lump sum at closing.
• With an adjustable-rate HECM loan, you can select: The amount that can be disbursed at closing (fixed- and adjustable rate) and during the first 12 months (adjustable-rate only) is limited to the greater of 60% of the principal limit amount or the sum of mandatory obligations plus 10% of the principal limit. This will be further explained during your free Consultation with us.
• Tenure: Equal monthly payments for as long as you remain in your home.
• Term: Equal monthly payments for a fixed period of months selected by the borrower.
• Line of Credit (LOC): Draw at any time and in any amount of your choosing until the line of credit is exhausted.
• Modified Tenure: Combination of line of credit plus scheduled monthly payments.
• Modified Term: Combination of line of credit plus monthly payments for a fixed period of months selected by  the borrower.