Myth 1. The bank owns the home or the Borrower will loose the home at the end of the Reverse Mortgage.

Fact --
With a Reverse Mortgage, the Borrower retains title to the home throughout the life of the Reverse Mortgage.  The Borrower cannot, as a result of the Reverse Mortgage, be forced out of his or her home, as long as the taxes and insurance are paid and the home is maintained in reasonable condition.

Once the last borrower permanently moves out of the home, the loan must be repaid. Typically properties secured by Reverse Mortgages still have equity when the Borrower moves or the owners pass away and therefore the Borrower or his/her heirs can choose to sell the home to repay the loan and keep the equity or refinance the home and keep the property.

Myth 2. The home must be paid off or be debt-free to qualify for a Reverse Mortgage.

Fact --
The main purpose of a Reverse Mortgage is to convert home equity into cash, thus the name HECM (Home Equity Conversion Mortgage) is used as the name by HUD. As long as there is sufficient equity in the property, the homeowner may be eligible for a Reverse Mortgage. In fact, many seniors use a Reverse Mortgage to pay off an existing mortgage in order to eliminate a required monthly mortgage payment.

Myth 3. When a Reverse Mortgage becomes due, the bank sells the home.

Fact --
The Borrower is in control of the title, not the Bank or Lender. It's common for the Borrower or the heirs to sell the home to repay the loan, although it's a decision the Borrower or their heirs make. The option to refinance the home and repay the loan is always available to the Borrower or the heirs.

Myth 4. I can reduce my costs by moving into a smaller home.

Fact --
Seniors need to analyze their costs carefully before making this assumption. The process of selling a home and moving into a new home can be expensive. The typical real estate commission of 6% on a $300,000 home would be $18,000. Add to that costs associated with moving, closing costs on a new home and taxes that will be set at a new base could be eye opening and more costly than anticipated.

Myth 5. Children want the equity in the home or don't feel comfortable with a Reverse Mortgage.

Fact --
Seniors are encouraged to talk with their children about Reverse Mortgages. Many baby boomers are faced with trying to plan for their retirement and pay for their children's education. Often, the children of many Seniors are happy that their parents have a financial solution available to help them live more independently and financially secure. In most cases there could be equity left for the children after the Reverse Mortgage is paid off.

Myth 6. The Borrower could end up owing more than the home is worth.

Fact --
This is one of the biggest beliefs of seniors that the bank will own the home at the end. The HECM products are insured by the Federal Housing Administration, an arm of the U.S. Department of Housing and Urban Development (HUD) and the Borrower and heirs are protected by HUD that you will never owe more than the house is worth. This is a non-recourse loan and protected by FHA insurance where the Borrower and heirs will never owe more than the house is worth.

Myth 7. Reverse mortgage proceeds will impact Social Security and Medicare benefits.

Fact --
A Reverse Mortgage will generally not affect regular Social Security or Medicare benefits. It is recommended that the Borrower speak with his or her financial advisor and appropriate governmental agencies

Myth 8. There are restrictions on how the money is used.

Fact --
There are no restrictions. The cash proceeds from the Reverse Mortgage can be used for any purpose. The Borrower has complete control of the money received and can use it for anything he or she desires.

Myth 9. Once the proceeds are received, taxes will need to be paid.

Fact --
The cash proceeds from a Reverse Mortgage are TAX-FREE because it is a return of equity in the home and it is the homeowner’s money.

Myth 10. -- Reverse Mortgages are only for seniors in need (NOT TRUE).

Fact --
Increasingly, Lenders are seeing the use of jumbo Reverse Mortgages geared toward Borrowers whose homes exceed the FHA lending limits, which peak at $362,790. Many seniors with multi-million dollar homes are using Reverse Mortgages to reduce their estates or as part of a plan to donate funds to charities in life or as part of their estate or legacy planning in conjunction with advice from financial advisors.