Demystifying Reverse Mortgages
Reverse mortgages have been around for decades, but there are still many misconceptions and myths surrounding this financial product. A reverse mortgage is a type of home equity loan that allows homeowners who are 62 years or older to convert a portion of their home’s equity into cash. Unfortunately, these misconceptions and myths have prevented many seniors from considering a reverse mortgage as a viable option. In this blog, we will address some of the most common reverse mortgage myths.
Myth #1: The lender will own the home.
One of the most common reverse mortgage myths is that the lender will own the borrower’s home. This is not true. The borrower retains ownership of the home and must continue to pay property taxes, and homeowners insurance, and maintain the property.
Myth #2: The heirs will be responsible for the loan repayment.
Another common myth is that the borrower’s heirs will be responsible for repaying the loan. However, the reverse mortgage is a non-recourse loan, which means that the borrower or their estate will never owe more than the value of the home at the time of repayment. If the loan balance exceeds the home’s value, the lender absorbs the loss, and the borrower or their heirs are not responsible for the difference.
Myth #3: Only people with financial difficulties get a reverse mortgage.
Many people believe that only those with financial difficulties get a reverse mortgage, but this is not true. Many people use a reverse mortgage as a financial planning tool to supplement their retirement income or pay for unexpected expenses.
Myth #4: The borrower cannot sell the home after getting a reverse mortgage.
This is also not true. The borrower can sell the home at any time and use the proceeds to repay the reverse mortgage. Any remaining equity after the loan repayment is theirs to keep or pass on to their heirs.
Myth #5: The borrower can owe more than the home is worth.
As mentioned earlier, a reverse mortgage is a non-recourse loan, which means that the borrower or their estate will never owe more than the value of the home at the time of repayment. This is one of the most important protections of a reverse mortgage.
Reverse mortgages can be a valuable financial tool for seniors looking to supplement their retirement income or pay for unexpected expenses. However, it’s important to do your research and understand the facts before making a decision. Debbie @ Debbie Cooley Mortgage is available for a free consultation or call Debbie 727-688-2851
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