Dispelling Common Reverse Mortgage Myths
A reverse mortgage is designed to help seniors make use of the equity they have built in their homes. Also known as a home equity conversion mortgage (HECM), a reverse mortgage provides seniors with cash flow or a credit line in exchange for the equity in their homes. At Great Florida Lending Inc., we help to educate our clients with honest information so they can make informed decisions about HECMs. Here, we dispel some common reverse mortgage myths. We proudly serve clients in Miami, Kendall, Hialeah and Coral Gables, FL. Contact us with further questions and set up a consultation today.
Myth: A reverse mortgage will affect my Social Security or Medicare.
Truth: While every loan is different, it is not typical for an HECM to affect your income from government entitlement programs like Social Security or Medicare. In some cases, it may affect Medicaid or other programs based on a person’s financial need. Our loan officers will evaluate your finances, including any federal sources of income, to determine if an HECM could negatively affect your budget.
Myth: Your heirs can be held liable for your loan.
Truth: At no point will your heirs or dependents be held responsible for your reverse mortgage loan. This type of program was specifically designed to protect seniors – and their dependents – from excessive costs resulting from housing market fluctuation. Once the HECM borrower dies, the loan balance can be paid off through the sale of his or her home, or paid in cash through other assets, should his or her heirs choose to keep the home. If the home is sold for less than the remaining loan debt, no one is held liable for the difference. This is a type of “non-recourse” loan.
Myth: You are limited in how you may use cash or credit from your HECM.
Truth: Our clients use their HECM loan for all types of things. Some use their loans as supplemental income, which can be a great help for older clients on a fixed income. Others use their funds for home improvements or to make their homes more accessible in older age. You can use your reverse mortgage loan for virtually anything you would like. You can choose to receive your funds in a lump sum, in regular payments, as a line of credit, or as a combination of the three. If you are interested in purchasing a new home, you can also apply for a reverse mortgage for purchase, in which your equity in your old home is used to purchase a new home.
Myth: If I sign up for a reverse mortgage, the lender will own my home.
Truth: When you enter a reverse mortgage contract, you maintain ownership of your home. Your home will only be sold to pay off your loan after you die or if you decide to sell your home. If you continue to pay your property taxes, insurance and other expenses, your home will remain in your full control.
Myth: I must have my home fully paid off to apply for a reverse mortgage.
Truth: Many clients apply for a reverse mortgage without having paid off their existing mortgages. An HECM is a great option for some people in that it can eliminate mortgage payments in exchange for the equity that has been built in their homes. It is true that you can get a higher loan the more equity you have built in your home. When you call the loan officers at Great Florida Lending Inc., we can evaluate your situation to determine if a reverse mortgage makes sense for you financially.
Myth: You cannot sell your home once you sign up for an HECM.
Fact: You are free to sell your home even if you have a reverse mortgage. Typically, clients who choose to move while under a reverse mortgage choose to use cash from the sale of their homes to pay off their reverse mortgages. If you do not decide to sell your home, you are free to live in it, if you continue to pay housing expenses like taxes and insurance, for the rest of your life. Your loan is repaid after your death using your equity.
If you are considering taking out a reverse mortgage, please contact Great Florida Lending Inc. We are here to serve residents in Miami, Kendall, Hialeah and Coral Gables. Whether you are ready to apply for a reverse mortgage or simply have questions, we are here as a resource for you. We can help dispel reverse mortgage myths and give you honest answers for you.