The Top Five Reverse Mortgage Myths, Debunked

Get the facts before deciding if a Home Equity Conversion Mortgage is right for you.

Homeowners age 62 and older who are looking for a way to secure their financial future have access to HECMs (Home Equity Conversion Mortgages), also known as reverse mortgages. However, there is a great deal of misinformation about how these loans work and who they can truly benefit.

Myth 1
The bank will own your home.

  • You continue to retain full ownership of your home like any other type of home mortgage product.
  • Any maintenance or improvement decisions are yours to make as they always have been.
  • Simply continue to pay your property taxes and homeowners insurance.

Myth 2
Your home must be mortgage free to be eligible.

  • Think of a HECM like any mortgage refinancing. Your existing mortgage balance would be paid off.
  • Because of how a HECM is structured, any existing mortgage balance would need to be in the range of 40-60 percent of your home’s value.
  • At age 62 the existing mortgage needs to be around 40 percent.
  • At age 75 the existing mortgage needs to be around 60 percent.

Myth 3
Only people with financial difficulties need HECM

  • Actually, it can be a huge added tool in your retirement tool chest.
  • Can provide additional funds not previously accessible to you.
  • Pay off outstanding debts, eliminating those monthly payments.
  • Working with your financial planner, a HECM can be used to help extend your retirement assets.

Myth 4
Your children/estate will have to pay off the HECM.

  • Your children/estate will never have to repay any more than the current value of the home at the time it’s sold.
  • If the balance of the HECM is less than the value of the home, then the remaining proceeds would be an asset of the estate.
  • The structure of a HECM guarantees that the children/estate will NOT be left with any debt to pay on your home.

Myth 5
I’ve got a HELOC, I don’t need a HECM

There are some major differences between these two mortgage loan products:

  • HELOCs require a monthly payment.
  • HECM LOCs have no monthly payment requirements.
  • HELOCs have a fixed line of credit that will never increase.
  • HECM LOCs will continue to become larger over time.
  • HELOCs can be decreased or frozen.
  • HECM LOCs can never be decreased or frozen.

Mark Violette
(207) 730-1495
[email protected]

Disclaimer: This material is not from HUD or FHA and has not been approved by HUD or a government agency.

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