Reverse Mortgage Misconceptions

Fallacies About Reverse Mortgages

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Many myths and misconceptions exist about reverse mortgages. As with any other financial product there are advantages and disadvantages, but reverse mortgages are misinterpreted and misunderstood by many people and even some financial institutions. Many people form an opinion about reverse mortgages based on false information obtained from unreliable sources.

One of the most common reverse mortgage misconceptions is that the lender and not the homeowner own the home once a reverse mortgage is taken out. This idea is completely false and unfounded. The homeowners continue to hold the title to the home as long as they reside at the home. This type of mortgage is just like any other loan with the homeowner retaining title. Never does the lender own the property.

Another of several reverse mortgage misconceptions is that people who are having severe financial problems take out reverse mortgages. This misconception is false since a wide range of individuals utilizes this type of mortgage. Some people may need a reverse mortgage more than others may, but they are popular with seniors interested in the benefits it offers. Some borrowers may just want to use the funds for luxury items like vacations or a new car. False reverse mortgage misconceptions like this one continue to persist.

Reverse mortgage misconceptions that involve the receipt of government funds concern many potential borrowers. Social Security and other government benefits are not affected by a reverse mortgage, as many people believe. Funds from a reverse mortgage are not considered income. Only benefits based on need may be affected. Medicare and Social Security are entitlement benefits not need-based. The money received from a reverse mortgage is not subject to income tax because it is proceeds of a loan.

Major reverse mortgage misconceptions concern surviving spouses and their liability. If a spouse is listed on the reverse mortgage, the surviving spouse does not have to make repayment upon the death of the primary borrower. The misconception that payment is due at the time of the death is false and unfounded.

Reverse mortgage misconceptions about the risks associated this type of loan are unfounded. The reverse mortgage is one of the safest financial products available for seniors. The National Reverse Mortgage Lenders Association (NRMLA) and the federal government enforce strict regulations and guidelines that protect seniors against unscrupulous practices.