Let’s Talk About The Myths Surrounding Reverse Mortgages—and Why Working with a Local Lender Like Nathan at Mortgage South Is Your Best Option
As homeowners move into retirement, many find that the equity in their home is their largest financial asset. Most people do not tap into that equity or utilize it to its fullest because reverse mortgages remain shrouded in myths and misconceptions. At Mortgage South, we’ve guided hundreds of clients in Chattanooga and Nashville through the ins and outs of reverse mortgages. In this blog, we will tackle the most commonly asked questions about reverse mortgages, the myths, explain the advantages of working with a trusted local lender, and show you how a Reverse Mortgage or HECM for Purchase can work for you during retirement. A reverse mortgage is more than a loan; it is a valuable tool that has been underutilized by homeowners in retirement.
1. Myth: “The Bank Will Own My Home”
Fact:
The most common misconception that we hear from potential clients is that they will no longer be in ownership of their home. This just simply isn’t true! The borrower retains complete ownership of the home just like with any other mortgage. They can continue to live in the home as their primary residence until the last remaining borrower leaves the home. Homeowners are responsible for property taxes, homeowners’ insurance, and upkeep. At any point in time, they can sell the home, pay off the loan and keep the equity, just like any other mortgage. Most people feel most comfortable when they work with a local lender who truly understands the markets in Nashville and Chattanooga. To sum it up, you remain in 100% ownership of the home and a reverse mortgage allows you to stay in your home during retirement with no required monthly mortgage payment.
2. Myth: “My Estate will be responsible for the Debt”
Fact:
An FHA insured reverse mortgage is a nonrecourse loan. This means that neither the borrower nor their estate will ever owe more than the home is worth when the loan becomes due and payable. The estate can choose to keep the home by repaying the loan or they can sell the home, repay the loan and keep the difference if the sale exceeds the loan payoff. The remaining equity goes to the estate; if there is a shortfall, the FHA insurance covers the remaining balance.
Let’s sum it up: FHA insurance offers unique terms in that it makes the loan a non-recourse loan. This protects the borrower and their estate from ever owing more than the home is worth.
3. Myth: “Only Financially Desperate People Take Out a Reverse Mortgage. “
Fact:
Reverse Mortgages were developed to help those in retirement utilize the equity in their home to pay off debt, payoff an existing mortgage, turn on an income stream through the line of credit feature or even right-size or relocate using a HECM for Purchase without a required monthly mortgage payment. In the current inflationary environment, tapping the equity in their home is a great way to hedge against depleting their retirement accounts or their taxable IRAs.
Let’s sum it up: While a reverse mortgage can help those in a challenging financial situation, a reverse mortgage line of credit will grow over time, building a buffer against inflation and market volatility.
4. Myth: “I’ll Lose My House If I Travel for an Extended Period of Time”
Fact:
Even though a reverse mortgage requires you to live in the home as your primary residence, you are free to travel without limit. If you decide to move permanently or sell your property, you can repay the loan or let your estate sell it, repay the loan, and keep any remaining equity.
Let’s sum it up: A reverse mortgage does not limit your ability to travel, as long as you maintain the home as your primary residence.
5. Myth: “Reverse Mortgages Are Too Expensive”
Fact:
The closing costs are more expensive than a traditional mortgage because of the upfront FHA mortgage insurance premium that is financed into the loan. This premium allows the homeowners some very unique terms to their mortgage, such as the ability to live in the home with no required monthly mortgage payment, the non-recourse feature to protect the borrower and their estate, and the ability to always have access to their line of credit regardless of the housing or banking market.
Let’s sum it up: Fees are capped by FHA and can be financed into the loan—ensuring affordability.
6. Myth: “I Have to Have My Home Paid Off to Qualify”
Fact:
A reverse mortgage will pay off your existing mortgage, as long as the balance does not exceed the lending limits set by FHA. Clients can qualify as long as they have sufficient equity in their home and meet age and occupancy requirements.
Fact: A reverse mortgage can be used to pay off existing liens, consolidating debts into one interest-accruing, tax-free loan.
6. Why Should I Work with a Local Lender Like Mortgage South?
Reverse Mortgages Are All We Do!
Mortgage South has been in business since 1987 and in 1993, we worked with the State Legislature in Tennessee to get the first reverse mortgage passed. We then closed the very first reverse mortgage in the state! We understand the real estate markets in Nashville’s vibrant neighborhoods and Chattanooga’s scenic riverfront communities. Our local experience means we sit down with you face to face and explain the process in detail. We will listen to your needs and specifically craft a plan to help you meet your retirement goals. We only use local appraisers to give you peace of mind, faster closings, and seamless coordination with local attorneys, title companies, and realtors.
Unlike national call-center lenders, we offer one-on-one consultations. Clients speak directly with Nathan Guerrero who will guide them through every step—from initial equity analysis to closing day!
8. How to Use a Reverse Mortgage as a Financial Tool.
A reverse mortgage line of credit can act as a financial buffer during times of high inflation and market volatility. Any unused portion of the line of credit will grow over time, offering more money available when it is needed for unexpected expenses such as home repairs or medical needs.
To Delay Social Security or IRA Withdrawals
By drawing on home equity instead of retirement accounts, clients can postpone taxable withdrawals from IRAs and delay claiming Social Security, thereby maximizing delayed-retirement credits and avoid taxable withdrawals.
For Downsizing or Relocation
With a HECM for Purchase, homeowners aged 62+ can buy a new primary residence using proceeds from the reverse mortgage—often with no monthly mortgage payment. This strategy has enabled many retirees to sell large family homes for a more manageable home closer to healthcare, family, or cultural amenities or to relocate to the Nashville or Chattanooga areas.
9. How Do I Apply For a Reverse Mortgage with Mortgage South?
Call our Nashville or Chattanooga office to speak with Nathan Guerrero. He will consult face to face with you to talk about your goals, your needs, your property and help guide you to find the best solution for your situation. He will design a plan for you whether it be using a reverse line of credit, paying off your existing mortgage, a lump sum, or a hybrid plan. Your future goals are his priority, and he has the experience to help make the process easy.
Conclusion: Tennessee Homeowners Depend on Mortgage South for Their Retirement Goals.
Reverse mortgages are great financial tools and not a last resort. They can be leveraged strategically to help retirees maintain their lifestyle utilizing equity in their home, while still remaining in complete ownership of it. By working with a local lender like Mortgage South, you gain access to our deep local expertise in Nashville and Chattanooga and personalized service honed over decades of reverse mortgage lending.
Don’t let the myths you may have heard about reverse mortgages stand in the way of your retirement goals. Ask an expert like Nathan Guerrero, who has helped more Tennesseans find the best solution to their retirement needs. Contact Nathan Guerrero to explore how a Reverse Mortgage or HECM for Purchase could fit into your retirement plan—and take the next step toward financial confidence in your golden years.
Nashville: 615-657-5878 Chattanooga: 423-624-3878