Common Myths and Misconceptions of Reverse Mortgage Loans
How do you know if a program has become very popular in its industry? Answer: When there are so many misconceptions surrounding the program. You can find below some of the many myths and misconceptions surrounding reverse mortgage loan industry. You can believe them, or you can read on and come up with a more informed decision. Our advice is that you do the latter.
Myth No. 1: The lender will own my home with my reverse mortgage loan.
This misconception is on top of the list for this industry for a very good reason: it is the most common misperception there is surrounding reverse mortgages. When you take out a reverse mortgage loan, you are still responsible for your own home – for maintaining it, using it to its limits, for paying property taxes and for paying home insurance fees. In sum, you will still own your home not the reverse mortgage lender. You can even sell it if you like.
Myth No. 2: My loved ones will pay for the loan.
Reverse mortgage loans are non-recourse loans. Your lender can only recoup his investment after the sale or refinancing of the home. A lenders grasp over you has its limits. You will never owe more than the value of your home when the loan is paid. It is very important to have these myths and misconceptions clarified.
Myth No. 3: I must have zero debt on my home to qualify for reverse mortgage.
This third statement on the list of myths and misconceptions is completely not true. If you still have outstanding balances on your mortgages, a portion of the reverse mortgage loan can be used to pay for the existing loan. You can do what you want with the remaining amount, obviously using it wisely within your own limits.
Myth No. 4: Having a good line of credit and good credit standing is a pre-requisite to a reverse mortgage.
Your lender will not even look at your line of credit report when going through your reverse mortgage application. It will only check if you have taxes and other government debts that are outstanding. This is a very common one on the average persons list of myths and misconceptions.
Myth No. 5: Only poor people apply for the reverse mortgage industry.
It is true that many seniors apply for reverse mortgages to help them tide over retirement. However, many seniors take out reverse mortgages for less desperate reasons. They use reverse mortgages to make more money, or to plan for their estate. A good number also do it as a buffer for future expenses.
Myth No. 6: I’ll be living on debt with reverse mortgage.
A house is actually a dead investment – you cannot make money on it until you take out a mortgage. With a reverse mortgage you are actually just converting your equity into tax-free cash. The entire industry is based on using your home to the limits, being able to make money on your home and live in it at the same time.
Myth No. 7: My lender is going to sell my house when the reverse mortgage loan becomes due.
This misconception is false, the loan only becomes due when you, on a permanent basis, no longer live in your own home. In most cases, this happens is when you are dead. When this happens, your heirs pay the loan through a refinancing program or by selling off other assets. They can also sell the house and use sales proceeds to pay off the debt. Now that you have clarified all your myths and misconception and the industry limits you can go ahead and get a reverse mortgage loan quote.