10 Biggest Myths about Reverse Mortgages

1. If I get a reverse mortgage, that means the bank holds title to my home.

FALSE. Title docs not get transferred into the bank's name. Throughout the life of the loan, you own your home.

2. I must have good credit to qualify for a reverse mortgage.

FALSE. The lender will run a credit report for tax and federal liens purposes only. Your credit score doesn't matter for qualifying a reverse mortgage.

3. My house must be free and clear to qualify for a reverse mortgage.

FALSE. But all recorded liens must be paid off from the reverse mortgage proceed so the lender can take first position.

4. I am not allowed to hold title in my trust.

FALSE. The lending institutions will allow you to hold title in our trust as long as you meet all of the lender's and/or HUD's guidlines.

5. The only homeowners that get a reverse mortgage are seniors who are in financial hardship.

FALSE. We have found that seniors will use the money to go on vacation, buy a new car, remodel their home, pay for their grandchildren's education, buy another home, or just to feel secure in their golden years.

6. I am no allowed to change my payment plan after the close of escrow.

FALSE. You may contact the servicing department and make arrangements to change your plan for a small fee.

7. I cannot refinance a reverse mortgage.

FALSE. You can refinance your reverse mortgage if that make sense. Consult your reverse mortgage specialist to see if it's beneficial for you.

8. My house must be in prime condition if I am to be considered for a reverse mortgage.

FALSE. The lender requires that the home meet certain guidelines. If you are considering a Home Equity Conversion Mortgage, if must also meet HUD's requirements. You may also qualify for a repair set-aside if work needs to be done on your home. Check with your lender for more information.

9. If I decide to sell my home, the bank will make me pay back the loan and will collect a portion of the appreciation.

FALSE. The lender will only collect the amount that is due to them. If the loan balance is larger thant the home value, the lender will only collect the proceeds from the sale. You can never owe more than what your home is worth.

10. The amount I can get from a reverse mortgage is very small comparing to the value of my home.

FALSE. The amount you can get from a reverse mortgae is based on your age, a current interest rate and a value of your home. The older you are, the more money you can get. Based on a new reverse mortgage limit of $625,500, a 62-year-old can get $286,700 for a home that's worth $500,000, $228,000 if a home value is $400,000, a 75-year-old can get $341,000 for a home that's worth $500,000, $272,000 if a home value is $400,000.

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