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Myth 1 - I would be selling my house to the bank.
FALSE! You keep the title to your house. The lender will add a lien on the property, however you will still have complete control over it.
Myth 2 - My heirs will not inherit anything.
FALSE! Your estate only owes the balance on the reverse mortgage. The balance owed is the amount you’ve used plus interest. Let’s say you got a reverse mortgage and owed $50,000 after 5 years. Then you decided to sell the house for $450,000. The lender gets $50,000 and you get $400,000 less any Realtor® fees.
Myth 3 - I might outlive the loan.
FALSE! FHA/HUD reverse mortgages are designed specifically so that you can’t outlive the loan. When you get the reverse mortgage, the lender will charge 2% to purchase mandatory FHA mortgage insurance. That insurance guarantees that even if you live to be 100, you can never owe more than the value of your home.
Myth 4 - I could get forced out of my home.
FALSE! FHA/HUD reverse mortgages specifically state that you can not be forced out of your home.
Myth 5 - My Social Security and Medicare will be affected.
FALSE! Money from a reverse mortgage is not considered income. Therefore, a reverse mortgage does not affect Social Security or Medicare benefits.
Myth 6 - I would have to pay taxes on the reverse mortgage.
FALSE! Since a reverse mortgage is a loan, there are no taxes to be paid on the amount of money you receive.
Myth 7 - There are big out-of-pocket expenses.
FALSE! All of the costs, whether closing costs or interest, are financed. That means there are never out-of-pocket expenses at any point in the reverse mortgage.
Myth 8 - A reverse mortgage is similar to a home equity loan.
FALSE! First, home equity loans usually have income, debt and credit score requirements that a reverse mortgage does not. Second, you can outlive a home equity loan and be required to pay it off in full while still living in your home. This can never happen with a reverse mortgage. Third, a reverse mortgage may have a line of credit option and the unused portion grows in value.
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