I WILL LOSE MY HOME TO THE BANK — FALSE

Many seniors assume that in order to take out a reverse mortgage they have to relinquish the title of their property to the lender.  Others believe that when the loan has to be paid back, the lender will take their home and rob the heirs of their inheritance.  Both notions are false. The fact is that you are always in control of your home and you will retain title to your home for as long as you live in it; the lender never acquires title to the property.  You are guaranteed by the US Department of Housing and Urban Development (HUD) to live in your home for the rest of your life.  When the loan has to be repaid, the lender can exercise its only right, which is the right to be repaid the outstanding loan amount.  If there is not enough value in the house to repay the entire loan balance, the FHA and NOT the heirs will be responsible to repay to the lender the shortfall.  Any home value that is not needed to repay the loan balance reverts back to the estate.

REVERSE MORTGAGES ARE RISKY — FALSE

Reverse Mortgages are regulated, insured and backed by HUD, an agency of the Federal Government that administers this and other federal loan programs.  Due to strict HUD enforcement of its stringent regulations and safeguard, reverse mortgages are widely recognized as a senior-safe financial product.  You have the right to stop the loan activity at anytime during the application process. You cannot outlive your right to live in the house no matter how large the reverse mortgage loan balance becomes.  The reverse mortgage only becomes due when all homeowners have permanently moved out of the property or have passed away.

I WILL LOSE MY GOVERNMENT ASSISTANCE — FALSE

A reverse mortgage does not affect regular Social Security payments, Medicare or Medi-Cal benefits.  If you are receiving Medi Cal benefits however, you must be careful to withdraw from the credit line only the amount of funds that you will spend in the month of the withdrawal.  Otherwise, money that remains in your personal bank account would count as an asset which could adversely impact your Medi-Cal eligibility. Complying with this requirement takes discipline, nothing more.

REVERSE MORTGAGE PROCEEDS ARE TAXABLE — FALSE

Reverse Mortgage proceeds are not taxable.  The IRS does not treat the proceeds as income because the proceeds have to be paid back at some time in the future.  At the time of repayment, the interest that is paid is tax deductible to the estate.

TO QUALIFY MY HOUSE MUST BE FREE AND CLEAR — FALSE

Even seniors who have an outstanding mortgage or other debt on their home may be eligible. Today it is very popular for seniors to pay off their existing mortgages with a reverse mortgage.  After paying off the existing mortgage, the balance of the reverse mortgage proceeds is available for the borrower’s discretion.

MY HEIRS CAN END UP OWING MORE THAT THE HOUSE IS WORTH — FALSE

One of the biggest safeguards of the reverse mortgage program is the government guarantee that the borrower and the borrower’s heirs can never owe more than the value of the home at the time of repayment.  The government guarantees to the lender that if there is not enough value in the home to repay the loan, the government and not the heirs will repay to the lender the shortfall.