Reverse Mortgage: Top 5 Misconceptions Print E-mail

You may have encountered some people who firmly believe that reverse mortgage lenders owns your home or how reverse mortgages are only for desperate seniors. Unfortunately, those people are unaware of how reverse mortgages really work. To throw out all of the common rumors, here are the Top 5 Common Misconceptions of Reverse Mortgages...

 

1)  The bank owns your home.

The lender does not own your home.  In fact, you will still retain the title to your home when you have a reverse mortgage.   As long as you keep your property taxes and insurance up-to-date and paid, the lender cannot foreclosure on you.   That's the truth! 

 

2)  When the reverse mortgage loan becomes due, the bank sells your
       home.

The choice is actually up to you.  When it is time to repay the reverse mortgage loan, you have various options of paying the balance that is due to the bank.   These options include paying the balance of the loan and staying in your home or sell your home and use the money to repay the loan.  This common misconception is likely sparked from the fact that many seniors choose to sell their home pay off their loan, which makes sense since you will begin to pay the loan only when you leave.   Why keep a house that you're not living in?  

 

3)  If you have poor credit, reverse mortgage is not an option.

Credit scores have very little to no weight in determining your eligibility for a reverse mortgage. It is extremely rare to be denied a reverse mortgage loan based on your credit.   The reason why lenders will pull a credit report on you is to make sure you don't owe any money (generally taxes) to the government.  Even if you do owe some money to the government, you can use part of your reverse mortgage loan to pay it all off!  

 

4)  You have to be debt free to get a reverse mortgage.

One of the major benefits of a reverse mortgage loan is that you can actually use the cash you receive from the loan to pay off any debt.   You can even use it to pay your remaining balance of your forward mortgage.  If that is the case, your reverse mortgage lender will first determine how much money they can give you and then deduct the amount to pay off your forward mortgage.   The amount remaining is for you to use at your discretion, letting you take that vacation you've always wanted! 

 

5)  Reverse mortgages are only for seniors who are desperate and are

     "House Rich and cash poor."


A reverse mortgage is an excellent financial planning tool that allows seniors to enhance their lives by having tax-free income* to use whenever they want and on whatever they want.   Reverse mortgages allows seniors to feel more secure, knowing that money is available to use if they need it on medical bills, home-repairs, your favorite charities or even vacations.
 
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