Detaching the reverse mortgage facts from the fiction

Detaching the reverse mortgage facts from the fiction
You must have heard about reverse mortgages as the only option for the cash-strapped seniors in the US but you might not be sure if it’s legitimate or a scam. If you’re a senior who was about to surrender due to lack of funds, you need not fret . Having accumulated enough equity in your home will bestow you with the right to get a reverse mortgage loan from your lender. Reverse mortgage loans are also known as Home Equity Conversion Mortgage (HECM), and have become increasingly popular in the recent years. As a result, there has been too many misconceptions among the seniors regarding different facets of reverse mortgage loans. Such loans can be useful for the senior homeowners but they’re not loan programs for everyone. If you want to make some vital decisions about getting yourself a reverse mortgage loan, you first need to separate the myths from the facts. Here are some debunked myths of reverse mortgage loans.

If I opt for a reverse mortgage, the lender will own my property
This is a myth among the seniors as they think that as soon as they take out the reverse mortgage loan, the lender will become the owner of the property. But the fact is that the title and ownership to their homes will remain intact throughout the term of the loan and the owners can even choose to sell off their home at any point of time. As long as you maintain your home and pay your insurance and property taxes,the lenders can’t call the loan due.

I can’t qualify for a reverse mortgage when I already have an existing mortgage
When the seniors already have an existing mortgage, they think that they won’t qualify for a reverse mortgage loan But the fact is that with enough equity, you can not only take out a reverse mortgage but also use the proceeds in repaying the present mortgage loan. The reverse mortgage loan needs to be in a first lien position and so any other mortgage debt needs to be paid off immediately once you take out a reverse mortgage loan. In fact, the biggest reason behind so many seniors taking out reverse mortgage loans is to pay off their existing mortgages.

My heirs will be responsible for repaying the reverse mortgage loan
Reverse mortgage loans are non-recourse loans. This means that if the real estate property is sold off to repay the loan when the homeowner expires or leaves the home for some other reasons, there’ll be no mortgage debt for any heirs for repayment. The present market value of the home is the maximum amount owed. In case the heirs want to retain the home, they have to repay the balance in full to the lender.

It is only the low income seniors who can qualify for a reverse mortgage
Although it is true that majorly the low-income seniors are the ones who require immediate funds to meet their soaring personal financial obligations but that doesn’t mean that reverse mortgages are financial products that are only available for the low-income seniors. Usually, seniors with huge debt obligations and lower access to funds, are the ones who take out such loans, but there are also a large number of wealthy seniors who take out reverse mortgage loans in order to build a cushion or an emergency fund.
Therefore, if you’re a senior who has been wondering about the prospects of getting a reverse mortgage loan, you should first educate yourself on the facts. Stop believing in the myths and help yourself make informed and measured decisions.

Guest post by Sam Stokdale