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MYTH 1: I cannot get a reverse mortgage if I have an existing mortgage.
FACT: False. If your house isn’t paid off, the proceeds you receive from the reverse mortgage must first be used to pay off any existing mortgage at funding. This is one of the most common reasons homeowners 62 years and older take out a reverse mortgage.

MYTH 2: If I take out a reverse mortgage the lender will automatically own my home.
FACT: False. Homeowners retain title and ownership to their homes when taking out a reverse mortgage. However, as with other types of mortgages, if the borrower defaults on the loan terms the home may be foreclosed upon. The borrower must continue to live in his/her home as
his/her primary residence and maintain the home. The borrower must also pay his/her property taxes and homeowner’s insurance to avoid default.

MYTH 3: There are restrictions on how reverse mortgage proceeds may be used.
FACT: False. There are no restrictions. The cash proceeds from the reverse mortgage can be used for virtually any purpose and borrowers should be cautious of lenders attempting to cross sell other products. Many seniors have used a reverse mortgage to pay off other debt, help their kids, make ends meet or have a financial reserve in the form of cash rather than equity in their home (since a reverse mortgage cashes out some of the equity in one’s home). 

MYTH 4: Only low-income seniors get reverse mortgages.
FACT: False. Although some seniors may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly mortgage payments. Without monthly mortgage payments, many homeowners find they can maintain their existing quality of life while accessing cash from the equity in their home to help with future expenses. A growing number of people who have no immediate need are taking out these loans so that they have a financial cushion from the equity in their home for future expenses.

MYTH 5: If I outlive my life expectancy, the lender will evict me.
FACT: False. Reverse mortgages have no time limits like a traditional mortgage, 15 or 30 years for example. As long as the borrower maintains their home, continues to live in it as their primary residence, pays property taxes and homeowners insurance, and does not otherwise default on the loan there is no time limit on the loan. Failure to do these things could lead to foreclosure of the loan.

MYTH 6: A reverse mortgage will automatically affect all of my government benefits.
FACT: A reverse mortgage generally does not affect regular Social Security or Medicare benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive would count as an asset and could impact Medicaid eligibility. Supplemental Social Security also may be affected.
If you have any questions about this issue, I highly recommend that you consult with a federal benefits administration’s office or a financial advisor. Getting educated in advance of getting a reverse mortgage as it relates to these issues is critical.

MYTH 7: There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
FACT: False. Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

MYTH 8: My children will be responsible for the repayment of the loan.
FACT: If the borrower or their estate wants to retain the property, the balance must be paid in full. However, as long as the borrower or their estate sells the property to pay off the debt, there is no recourse if the HECM loan balance exceeds the home’s value at maturity. Any equity remaining in the property (if any) after the reverse mortgage is retired belongs to the borrower or their estate.

MYTH 9: All reverse mortgage lenders take advantage of seniors.
FACT: False. Seniors who have been involved in reverse mortgage lending schemes are typically victims of unsavory lenders. As a consumer, you should only work with a reputable lender experienced in reverse mortgage lending. Protect yourself by conducting as much research as possible and by consulting government agencies, your financial advisors and the National Reverse
Mortgage Lender’s Association (NRMLA).

MYTH 10: I’ve heard I won’t qualify for a reverse mortgage because of my limited income.
FACT: Traditional forward mortgages have income qualifications and credit scores; whereas the HECM has financial requirements that must be met to ensure adequate resources to maintain the ability to pay property taxes, home owners insurance and HOA dues, if applicable. The financial assessment may limit some applicants’ ability to qualify, but you don’t know until you try.



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Jonathan Caguioa

NMLS# 250609 / DRE# 01137630 Mobile: 949-241-2527

ALLIANZE MORTGAGE NMLS# 346138 / DRE# 01403147

15820 Whittier Blvd, Suite G
Whittier, CA 90603

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