Reverse Mortgage Myths—Common Misconceptions
Separating Financial Fact From Fiction.
Over the years, there have been many misconceptions and an overall lack of understanding about what reverse mortgages are, and how you can use them.
At Crown Reverse Mortgage Financial, we’re committed to educating consumers about the many uses of this powerful financial tool. So we created this helpful Mythbusters section to help you realize what’s true and false.
Celia Avery
“I was very nervous about this, as you can imagine. It’s a big financial decision. However, In just 15 minutes of talking to Brian on the phone, I felt calm. That’s the highest praise I can give. 5/5!”
"Someone told me that with a reverse mortgage, the bank takes your home."
— MARIA
Questions? Consult with a Specialist Now:
(805)-434-5226
That’s fortunately a complete MYTH: you own your home. Not the bank or lender.
- Will you be able to pass on the home to your kids?
𝐓𝐡𝐚𝐭’𝐬 𝐓𝐑𝐔𝐄: 𝐲𝐨𝐮𝐫 𝐡𝐞𝐢𝐫𝐬 𝐜𝐚𝐧 𝐢𝐧𝐡𝐞𝐫𝐢𝐭 𝐭𝐡𝐞 𝐡𝐨𝐦𝐞.
Your heirs inherit the house, just as they would with any other mortgage. When the loan comes due, they can decide what to do to repay the loan balance. They can:
Arrange their own financing, pay off the loan, and keep the house for themselves
Sell the house and pay off the balance, keeping any extra funds
Or they can do nothing with the house and deed it to the lender
- Can you be forced out of your home for not paying a reverse mortgage?
That’s a MYTH: it was designed to help people stay in their homes.
Reverse mortgages were created specifically to allow seniors to live in their home for the rest of their lives. Because the homeowner typically receives payments from a reverse mortgage— instead of making payments to a lender—the homeowner can never be evicted or foreclosed upon for non-payment. However, it is the homeowner’s responsibility to maintain the home in good condition, keep property insurance current, and pay property taxes.
"I heard you shouldn’t get a reverse mortgage unless you’re desperate."
— JOHN
That’s a MYTH: a reverse mortgage is a powerful tool—not a last resort.
A reverse mortgage is a powerful financial tool that can be an important part of your overall financial plan.
From paying off an existing mortgage to delaying social security, or even creating an emergency line of credit, it’s a flexible product that gives you options.
In fact, with recent changes and the security of the U.S. Department of Housing and Urban Development’s FHA insurance, many financial planners have begun to discuss reverse mortgages. They are turning to clients who need additional sources of retirement income.
Questions? Consult with a Specialist Now:
(805)-434-5226
- Will you still be able to get your Social Security and Medicare?
That’s TRUE: those benefits are generally unaffected by a reverse mortgage.
Government entitlement programs such as Social Security and Medicare are not affected by a reverse mortgage—however, need-based programs such as Medicaid may be. To stay eligible for Medicaid, you’d need to manage how much you take from the reverse mortgage per month to ensure you don’t exceed Medicaid limits. Consult a qualified financial advisor to learn how a reverse mortgage may impact your eligibility for some government benefits.
- Are there a lot of upfront costs associated with a reverse mortgage?
That’s a MYTH: they don’t require large out-of-pocket expenses.
Mortgage loan origination costs and interest rates are comparable to those of traditional mortgages. There are FHA insurance costs that some traditional mortgages don’t require, but the insurance benefits are well worth the relatively small cost. Typically, lender closing costs and fees can be financed into the loan, so there’s little required out of pocket.
"Will I have to pay taxes on the reverse mortgage?"
— MARIA
Questions? Consult with a Specialist Now:
(805)-434-5226
That’s a MYTH: the proceeds are not considered income, and are NOT taxable.
The cash you receive from a reverse mortgage is your loan; it’s not your income.
You see, the money from a reverse mortgage comes from your home’s equity. This already belongs to you, so it’s not considered income.
Plus, the interest on a reverse mortgage can be tax-deductible when it’s repaid. Consult your tax advisor for more information. To learn more about common misconceptions regarding reverse mortgages,