Myth: The bank will own the senior's home.
Fact: Banks are not in the business of owning seniors' homes. The senior's name remains on the title to the home as it always has, there is no change in title. The senior retains ownership.
Myth: The bank can make an elderly person leave their home.
Fact: Reverse mortgages are regulated by the federal government. Banks are not allowed to make seniors leave their homes. The lender is more interested in having the senior stay in the home for as long as possible. Seniors are responsible for continuing to pay their homeowners insurance, property taxes, and keeping the home in good shape.
Myth: The heirs will be responsible for repaying the loan when the senior dies.
Fact: Heirs are never responsible for repaying these loans. These are "non-recourse" loans. The estate has one year to sell the home for fair market value. That sale price repays the loan.
Myth: Seniors have to make payments on reverse mortgage loans.
Fact: No payment is ever due on a reverse mortgage until the last living homeowner permanently leaves the home.
Myth: Reverse mortgage proceeds are taxable and affect Social Security or Medicare.
Fact: Proceeds are not taxable and do not affect Social Security or Medicare. Supplemental Security Income (SSI) and Medicaid can be affected.
Reverse mortgages aren't for everyone. However, it has been proven that in many cases the cash flow generated from a reverse mortgage will help seniors live better. Families should contact a reputable lender who can analyze the family's specific needs and possible future needs as it relates to paying for care.
Valerie VanBooven RN, BSN, PGCM is an author, professional speaker, and professional geriatric care manager. Valerie is the Director of Marketing and Public Relations for Next Generation Financial Services, a division of 1st Mariner Bank.