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10 myths about a reverse mortgage Print E-mail
There are a lot of myths which are going around about reverse mortgage. These misconceptions are mainly due to the lack of information or the lack of understanding of the concept of reverse mortgage. Here we discuss 10 myths about a reverse mortgage. There is a myth that the lenders would get the ownership of your home after a reverse mortgage. This is a very false notion as the title of the house still stays with the owner, the lender's equity is limited to the amount of loan which is outstanding against the property. There another misconception that in order for a property to be eligible for reverse mortgage, there cannot be any outstanding lien against the property. This is not entirely true as the reverse mortgage loans will be extended as long as the owner has sufficient equity in the property. However, outstanding lien has to be paid off from the loan advances of reverse mortgage. Another myth which is doing the rounds is that the lender will sell off the home once the reverse mortgage becomes due. The truth is that the decision to sell is the discretion of the owner or the heirs. If they want, then the property will be sold off and the loan amount replayed or they can finance the loan and still retain title of the property. People keep saying that it might be cheaper to move into a smaller home instead of taking a reverse mortgage. This option may be suitable for some people, but not always true. One must understand that there are several costs involved in moving from one home to another. The typical real estate commissions are 6% of property value plus the expenses for relocation. Add to this the emotional loss of leaving your home at an old age. A popular misconception is that the heirs will be made liable for the difference between the loan amount and the value derived from sale of property. The fact is that in reverse mortgage, the risk of this difference in taken up by the lender and the heirs are not liable to pay any amount. They can only get a repayment by selling the property. If someone told you that you need to have solid finances, good credit and level of income to be eligible for reverse mortgage, then you are wrong. There are no such requirements and the reverse mortgage loan is given out based solely on the home equity of the owner. Another myth is that one needs to make monthly repayments in a reverse mortgage. The truth is exactly the opposite. Reverse mortgage enables you to have certain monthly loan advances which come to you. It's a myth that there are restrictions on how the money from the loan can be used. There are no such restrictions and the borrowers can spend it any way they like. Money received from reverse mortgage is tax free; hence it's a misconception that you need to pay taxes for loan advances. Also, reverse mortgage does not affect Medicare benefits or other Social Security payments but depending on income level may affect Medicaid benefits. Thus we discussed 10 myths about reverse mortgages. Hope things are a bit clear now.


 
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