Uncovering Misconceptions and Myths about Reverse Mortgage
Have you heard about the different myths about reverse mortgage
? Do you want to know the truth about this loan? Read on so you can thoroughly understand the basics of reverse mortgage.
The Lender Will Take Your House
This myth is totally untrue. With a reverse mortgage, you remain the owner of the home while the lender records a lien. It is similar to a forward mortgage. The difference is that you get payments from the lender because you have borrowed using the equity of your home. So instead of making monthly payments for the money you borrowed, the lender will give you a lump sum, a monthly payment, or a line of credit. It is also possible to get all three options.
There is no need for you to make payments on the loan. The interest on the other hand will accrue until the loan is paid down in full. In case you pass away, you sell the home, or you move permanently to another home, then the loan becomes due and payable. You may opt for a second home program which is currently available. But you have to remember that you or your heir will retain the title to the property.
Those with Bad Credit Cannot Apply
This is another myth. In a reverse mortgage, credit qualification is not applicable. If you are getting the Home Equity Conversion Mortgage of the government, the only requirement is that you must not be delinquent on your other loans like FHA loan, Federally Insure SBA loan, Federally Insured Student Loan, and similar other programs. You can even apply for reverse mortgage if you have declared bankruptcy. The only requirement is that you should have a history of consistent payment for the bankruptcy plan for 12 months. In fact, you can qualify for a reverse mortgage even if you are already facing a foreclosure.
The House Must be Fully Paid
Some people believe that the house must be paid in full before they can qualify for reverse mortgage. This is completely false. It is true that most seniors get reverse mortgage with homes that are already paid in full or have very small balances. The money from the loan can be used to support them during their retirement. There are also seniors who take out reverse mortgage in order to pay off existing financing. The cash from reverse mortgage enables seniors to close a loan so that they can stop payments for life.
Reverse Mortgage Affects Social Security Benefits
This is another myth that you must ignore. This type of mortgage will never affect your social security benefits. Need based programs like Medicaid can be affected if the reverse mortgage is improperly managed. So it is recommended to consult a professional financial advisor on this matter. But you will get the guarantee that retirement programs, social security benefits, and taxes will never be affected by reverse mortgage.
A reverse mortgage loan can greatly help you. This loan could give you a good source of income when you retire. Do not believe the false myths because reverse mortgage is a good financial option.
Uncovering Misconceptions and Myths about Reverse Mortgage
By: Rob Blake
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