There are many misconceptions out there regarding reverse mortgages and with this article we aim to eliminate them and further educate potential clients on the facts of reverse mortgages.
§ bank will own my home
§ my heirs will not inherit my home
§ my heirs wont receive any of the profits if the home sells
§ my heirs/estate will have to pay for my reverse mortgage
§ I will pay hefty fees to get a reverse mortgage
§ the bank is trying to steal my home
§ I will have to make a monthly mortgage payment
§ If I die or live beyond a certain age the bank will take my home
§ interest rates are currently high
§ this program is only for those in financial needs
None of the above is true – those are some of the most common reverse mortgage myths that seniors are familiar with. Do not believe everything you hear on the news as many news channels are not update to on how the reverse mortgage works – and they are basing their research on the old reverse mortgage – where as now there have been many program changes including the introduction of the HECM Saver to make this program a great one for seniors looking to borrow equity from their homes without having another monthly mortgage payment to make.
We hear this one all the time “a reverse mortgage is when the bank gives you so money and in return they can own your home at a discount.” This couldn’t be further from the truth, the bank does not own you home if you take a government insured reverse mortgage, you will keep title to the home.
We only compare TOP HUD lenders who are able to get you a government insured reverse loan – to get a quote visit free reverse mortgage quote page.
Banks/Lenders are in the business of lending money and in return they want to receive income through interest rates they charge. Just like a traditional mortgage, a reverse mortgage is loan which the bank has a lien/claim on your home, but this does not give the bank ownership of your home, it simply allows them to charge the agreed upon closing interest rate. The main difference between forward loans (traditional loans) and reverse mortgages is that there is never a repayment (mortgage payment to make) while you are retired in the home – this adds the confusion as to how will the lender get paid then – but as just stated above the interest rate charges will simply accrue onto the loan principal this adding more to the loan every year. To offset your borrowing costs the property will continue to increase in value and since any current and future equity is your’s this is a great way to reduce the actual costs of borrowing a reverse mortgage.
At any point and time you are allowed to sell the home for profit/loss depending on market, refinance the mortgage, make modifications to the home, and move out if so desired. The reverse mortgage loan comes due only when the both borrowers leave the property for 12 months. ( pass away, go to nursing home, move)
If there is two borrowers involved the reverse mortgage will not come due until both borrowers have left the property for 12 months, so in case one partners leaves before the other, the one who stays can keep collecting income from the bank.
Facts about the Reverse Mortgages
§ borrowers must be 62 or older
§ must own home ( can have existing mortgage )
§ must be primary residence
§ no default of government debt
§ no income or credit scores are required to qualify
many of these misconceptions are caused since seniors dont have access to free unbiased reverse mortgage information and dont have a good understanding of how does the reverse mortgage work.
With a reverse mortgage you do not make monthly or lump sum payments to the bank. This mortgage is called reverse because the roles are essentially reversed and the bank will pay you the agreed income instead of you paying them.
Money/income from the reverse mortgage can be selected depending on your needs, you have many options as to how you can receive your tax-free reverse mortgage income.
You can decided to receive money on a monthly basis, lump sum, line of credit, or mix and match to get a balance income source for retirement.
If you have had the wrong idea of how a reverse mortgage works, and would like to know everything there is to know in order to make a smart decision please call us or chat with us so we can help you in securing the best reverse mortgage.
Another huge misconception, and one which shows that many have no idea about how reverse mortgages work. Reverse mortgages are not only for desperate seniors, and many seniors getting reverse mortgages have properties/assets of well over $1 million dollar.
This program is specifically designed to allow homeowners of the age of 62 to tap into their homes equity without having to move or sell the home. There is nothing desperate about receiving a reverse mortgage, and many retirement planners are now welcoming this program with open arms.
Other misconceptions with reverse mortgages
Your home must be paid off to qualify for a reverse mortgage – False, if you have an existing mortgage it will need to be paid off, with enough equity the bank/lender will pay off your loan. To find the value on your home you can use this free tool called Zillow.com – they will give you an estimate on the value of your home – you will need to order an appraisal when you are ready to get a reverse mortgage loan.
You could end up owing more than your home is worth – False, this is a non recourse loan which means you will never owe more than the what the home is worth. If property values go down you have lived in the home without a mortgage payment, while also receiving income for life. The value of your home wont have any negative impact on your retirement if you are living in it without making a payment, either way the value of the home would have dropped whether or not you had a reverse mortgage only difference is that you got a chance to borrow some of the equity in your home.
The bank takes your home upon your death leaving nothing for your heirs – False, when the loan comes due your heirs/estate are the owners and can at that time either sell the home, take a mortgage to stay/refinance.
We have an entire page dedicated to all the top HECM reverse mortgage myths – here is a link to some of those pages.