Reverse Mortgage Pop Quiz

The misconceptions surrounding Reverse Mortgages continue to be a stumbling block keeping many seniors from taking advantage of this remarkable product. In an effort to help dispel some of the myths about reverse mortgages, I offer the following pop quiz. The answers are simply true and false responses followed with a brief explanation.

Reverse Mortgages are only available to seniors over 70 years of age – False. The minimum age requirement is that both spouses be at least 62 years of age.

If I get a Reverse Mortgage I no longer own my home – False. The key to understanding this concept is the word “mortgage”. A mortgage places a lien against a property and the truth is that in order to obtain a Reverse Mortgage the property must be IN and REMAIN IN the name of the borrowers only. The property must e maintained and taxes and insurance must be kept current, but the lender does not own your home.

A Reverse Mortgage makes it easier for your home to be sold out from under you – False. Here again the key word is “mortgage”. Like any other mortgage, a Reverse Mortgage places a lien on the property and is in the name of the borrowers. Nothing can be done with your property without your knowledge and consent.

My heirs will be saddled with the loan – False. A Reverse Mortgage is a “non-recourse” loan. This means that the lender can only derive repayment from the proceeds of the sale of the property. The most the estate will be required to repay the lender is the value of the home at the time of repayment. This is true even if the home’s value has decreased or the borrower lives to an extremely old age.

If I get a Reverse Mortgage my home goes to the lender at my death – False. Any value or equity remaining after the loan is repaid goes to the estate or the heirs of the borrowers. This means that if the home appreciates in value, the value or equity going to the heirs can be significant.

Challenged credit, low income or failing health can keep me from getting a Reverse Mortgage – False. A Reverse Mortgage has no credit, income or health requirements. Since no repayment is made on a Reverse Mortgage as long as one surviving spouse remains in the home, there are no income or credit requirements.

I have a current mortgage. Doesn’t that keep me from getting a Reverse Mortgage? – No. You may have a mortgage or other debt against your home and still get a Reverse Mortgage. All existing debt must be paid off with the proceeds of the Reverse Mortgage but any remaining funds are yours to access.

So if I get a Reverse Mortgage don’t I have to take the money in a lump sum? – No. There are five options available for you to receive the proceeds of a Reverse Mortgage. 1) Tenure: equal monthly payments as long as at least one borrower lives and continues to occupy the property as their primary residence. 2) Term: equal monthly payments for a predetermined number of months chosen by the borrower. 3) Line of credit: unscheduled payments or in installments, at times and in the amounts of the borrowers choosing until the line of credit is exhausted. 4) Modified Tenure: a combination of line of credit with monthly payments for as long as the borrower remains in the home. 5) Modified Term: combination of line of credit with monthly payments for a predetermined number of months chosen by the borrower.

The money I receive from a Reverse Mortgage can negatively impact my Social Security or Medicare – False. Reverse Mortgage proceeds are not taxable because they are not considered income but are, in fact, a loan. And since the United States Government sets Social Security, Medicare, and FHA Reverse Mortgage rules, they have all been made compatible. It must be stated however, that Supplemental Security Income (SSI) and Medicaid may be affected if you exceed certain liquid asset amounts. Consult your Reverse Mortgage Provider for these figures.