Changing the mind of a senior is not an easy thing to do.
They have strong beliefs.
When those beliefs are founded on facts, seniors usually make good decisions.
But sometimes, we find those beliefs are founded on the wrong information, and that can drive seniors to avoid things that may actually be able to help them.
Take reverse mortgages for example.
If a senior has watched a negative TV story or read an article about how reverse mortgages are a scam, they may have made up their mind.
We don’t want this to happen anymore! We want seniors to get the facts and make informed decisions about programs like reverse mortgages which were specifically designed for their needs.
Myth #1 – “I’ll Lose the Title to My Home”
I’ve had many seniors tell me that they didn’t want a reverse mortgage because they might want to leave the house to their children.
Getting a reverse mortgage does NOT mean your heirs cannot inherit your house. The home is in your name so your heirs can inherit your house.
It does, however, mean that your heirs would need to payoff your reverse mortgage in order to keep the home.
Again, like with a regular mortgage, the same thing would be true.
If you got a cash out refinance instead and wanted to deed your home to your children, they would eventually have to pay off that mortgage or refinance it into their names.
If you do get a reverse and stay in the house until you die, your heirs would sell the house (can also walk away if it’s upside down), or pay back the mortgage and the remaining proceeds/profits would then go to your heirs.
Your heirs are never responsible for the shortfall if they can’t sell the home for enough to pay off RM.
Myth #2 – The Lender Might Foreclose
A reverse mortgage is no different than any other type of mortgage in that the borrower owns their home and much like a traditional mortgage, they are responsible for paying the taxes and insurance.. The same thing applies for paying things like annual taxes and homeowners insurance.
But when it comes to reverse mortgages, there are additional protections required by the FHA before a borrower can get the loan. If a borrower doesn’t meet the new financial assessment, RM proceeds may be set aside in reserves to help prevent T&I default.
These protections are designed to safeguard seniors from losing their home if something unexpected occurs such as a prolonged hospital stay.
Myth #3 – The Closing Costs Eat Up Your Equity
There’s a big myth about the cost of reverse mortgages. I’ve heard them all…
It’s too expensive. The fees are too high. The rates are not good. There’s a prepayment penalty.
What IS true? Reverse mortgages DO carry fees.
But so do regular, “forward” mortgages.
Reverse mortgages, just like regular mortgages, have closing costs, origination fees, appraisal, title and inspections. Plus, because they are insured by the Federal Housing Administration (FHA), borrowers must pay mortgage insurance premiums (just like FHA & VA).
So while reverse mortgages aren’t free, they’re similar in cost to other lending products for “regular” mortgages. That’s why it’s important to shop around and work with a lender that offers competitive rates & fees on reverse loans.
Heard Other Myths?
These are the most common 3 myths we hear, but they certainly are not all of them!
If you’ve had other questions or “heard” other concerns from seniors you know or work with, please get in touch so we can get you the facts.
Our team has Certified Reverse Mortgage Professionals who are ready to give you the facts so you can help those around you make informed decisions.