Reverse Mortgage Myths: Dispelled!
Reverse Mortgages have been around for almost 30 years. However, there are still many Reverse Mortgage myths people believe are true.
Reverse Mortgages are still a mystery to most people. Not because they are actually overly complicated, but because there are many misconceptions about them that continue to perpetuate. Today, we are going to dispel some common myths about Reverse Mortgages you need to know so you have a greater understanding.
Myth 1: When You Get a Reverse Mortgage, You Lose the Title to Your Home
You don’t give away ownership of your home when you get a Reverse Mortgage. Just like any other mortgage, it is a lien against your home and your name remains on the title. You are still required to pay your property taxes, home owners insurance and to keep up your home.
It is true that in order to have a Reverse Mortgage, you have to live in your home. It doesn’t mean you can’t travel or have a second home. You still own your home and can move or sell at any time. If you sell, you must pay off the balance of your Reverse Mortgage and can keep the rest. If you ever owed more than the property is worth, the federal government guarantees that you or your estate would not be responsible for any deficits.
Rest assured, you always own your home when you do a Reverse Mortgage. With a Reverse Mortgage, you are simply taking a loan out based on the value you have built up in your home.
Myth 2: You Need a Certain Credit Score to Get a Reverse Mortgage
Reverse Mortgages do not have a specific credit score to qualify. Although your credit score history will be reviewed through Financial Assessment procedures, a high credit score is not needed to qualify.
Myth 3: You Can’t Get a Reverse Mortgage because You Already Have a Mortgage on Your House
Paying off an existing mortgages is one of the biggest reasons most people take out a Reverse Mortgage. A Reverse Mortgage can eliminate any monthly principal and interest payments you currently have, thus, making it much more affordable to stay in your home. The nicest feature of the Reverse Mortgage is you aren’t required to make monthly principal and interest payments, but you can make payments if you want. You get to choose, not the lender. There is no other program that gives you that flexibility.
However, homeowners will still have to pay their property taxes, homeowners insurance, and keep up on their property maintenance.
Myth 4: My Heirs Will have to Deal with Paying Back the Loan
The truth is that your heirs will have several options they can choose from when it comes to repayment. They can choose to sell the home to pay off the loan and keep any remaining money from the sale.
A second option is, they can purchase the home for the amount owed or 95% of the appraised value, whichever is lower. They also have the option of walking away from the home entirely if they choose to.
With that said, don’t worry! Taking out a Reverse Mortgage doesn’t mean you are leaving your kids with your debt. If you pass before the balance of the Reverse Mortgage is paid in full, it will be repaid by the proceeds from the sale of your home. If the proceeds are not enough, your children are not responsible for the balance. The government guarantees this protection to you and your heirs.
Myth 5: Reverse Mortgages are Only for Seniors with a Certain Income Level
A Reverse Mortgage is not designed for one type of person or situation – it depends on your unique financial situation. The truth is that there are many seniors with varying levels of income that choose to get a Reverse Mortgage.
While some people believe that a Reverse Mortgage is a loan of last resort, there are different reasons why people get these loans.
Myth 6: The Lender will Evict me If I Outlive my Life Expectancy
This is simply not true; it’s yet another one of the Reverse Mortgage myths we hear constantly. The first thing you need to know is that you still own your home with a Reverse Mortgage. The second thing is that Reverse Mortgage lenders don’t put any time limit on how long you can stay in your home. Even if you spent all of the money available, you can still remain in the home.
Myth 7: Reverse Mortgages are only for people who have no other options.
Many people think that they can only apply for a Reverse Mortgage if they have run out of other financial options. However, most people who apply for Reverse Mortgages actually have other financial options, but choose a Reverse Mortgage because it offers a great deal of flexibility.
It also provides for tax-free cash without creating a monthly payment and allows you to make payments whenever you want without penalty.
Myth 8: Reverse mortgages are too expensive.
Let’s face it, borrowing money is expensive. Although there are fees associated with a Reverse Mortgage, many homeowners find they are comparable to the closing costs of a traditional mortgage. Furthermore, homeowners who take a Reverse Mortgage believe the fees are worth the benefits they receive from the loan.
For any additional questions, give Reverse Mortgage Answers a call. If you have questions, we have answers.