Reverse mortgages are designed to help home owners over the age of 62. They can take out a reverse mortgage as a lump of cash, monthly payments, or as a line of credit. There are many misconceptions surrounding reverse mortgages, which make a lot of people avoid them. The truth is that reverse mortgages can be of great help when used by someone who knows how they work (Read: Buying a Home With Your Reverse Mortgage – It’s a Reality!). This article will expose the most common reverse mortgage myths.
Myth #1 – The Lender Owns the Borrower’s Home
Fact: Lenders have a few requirements when giving out a reverse mortgage, but they will not own your home. The title and ownership of the home will still be yours during the life of the loan, but the loan will have to be repaid if the owner relocates or dies.
Myth #2 – Reverse Mortgage Loan Proceeds Can Only Be Used For Certain Things
Fact: The truth is that the money you receive from your reverse mortgage can be spent however you like. You can use it for home repairs, medical bills, living expenses, or save it (Read: You Can Borrow How Much With a Reverse Mortgage?).
Myth #3 – Home Owners With a Mortgage Cannot Get a Reverse Mortgage
Fact: If you have enough equity in your home, you can use it to pay off your existing mortgage so that your reverse mortgage will be in first lien position.
Myth #4 – Reverse Mortgages Are Only Given to Low Income Seniors
Fact: The truth is that many seniors have money issues, but reverse mortgages have nothing to do with that. Many seniors prefer to take out a reverse mortgage in order to pay off their mortgages. Others use the money for medical bills, savings, travel, or even investing.
Myth #5 – Borrowers Are Evicted If They Exceed Their Life Expectancy
Fact: Reverse mortgages only have to be repaid when the borrower sells the home or dies, so living longer than expected will not have any negative effect, as long as the borrower keeps paying the property taxes and insurance, and continues using the home as a primary residence (Read: Delinquent on Your Reverse Mortgage? – Here’s the Help You Need!).
Myth #6 – Reverse Mortgage Advisors Work for the Lenders
Fact: In reality, most borrowers work with reverse mortgage advisors that are approved by the United States Department of Housing and Urban Development (HUD). Being 3rd party advisors, they have no interest but to help borrowers make the best choices.
Myth #7 – The Borrower’s Children Will Be Responsible For Paying Off The Reverse Mortgage
Fact: The borrower’s children will only have to pay off the debt if they wish to keep the property. The home can also be sold in order to pay off the debt, and any equity that remains will belong to the current home owner (Read: Top 10 Steps to a Reverse Mortgage) .
Myth #8 – Lenders Take Advantage of Borrowers Because They Are Old
Fact: Taking the time to research a lender before applying for a reverse mortgage is very important. This applies to all types of mortgages, not only reverse mortgages. Lenders will usually try to make as much money as they legally can, so it is up to you to get the proper counseling and make sure that you know exactly what you want from a reverse mortgage.
Reverse mortgages may seem scary, especially if you are old. Doing a bit of research and asking for help goes a long way when considering taking out a reverse mortgage. Before starting to believe in reverse mortgage myths, you should take the time to educate yourself on the subject. That is the only way to avoid being scammed, losing money, and many other problems that can arise when taking out a mortgage without knowing what you are doing (Read: Top 10 Things to Know if You’re Interested in a Reverse Mortgage).