Common Myths

Social Security and Medicare

Social security and Medicare are not affected by a reverse mortgage. However, needs based programs such as Medicaid can be affected if the applicant pulls too many funds out in a short amount of time.

There are large out of pocket expenses

Normally the only out of pocket expenses are counseling and the appraisal, everything else is financed from the loan.

A reverse mortgage can be outlived

Never, the reverse mortgage becomes due when all homeowners have permanently moved out of the home or have passed away.

A reverse mortgage sells the home to the bank

The homeowner will always keep the title to their home in their name. The lender adds a lien onto the title for the amount borrowed so the lender can make sure that it will eventually get paid back the money they have loaned.

The estate will no longer inherit the home

The estate inherits the home like it would but there will be a lien on the title for the balance of the existing home mortgage. The balance is whatever proceeds were received from the reverse mortgage plus the interest accrued.

The homeowner could get forced out of the home

The homeowner receives payments from the reverse mortgage and does not make payments, therefore the homeowner cannot be foreclosed on or evicted.

You have to pay taxes on a reverse mortgage

The money received from a reverse mortgage is not considered income and is not taxable. Even the interest is tax deductible when repaid.

A reverse mortgage is just like a home equity loan

The only similarity is that they both use the home’s equity as collateral.