10 Popular Myths And Facts About Reverse Mortgages
By Juhani Tontti
The myths are like gossips, which start from somewhere and live their own lives. Usually they sound like facts and are easy to understand. Unfortunately they cause a lot of trouble. This article presents some of most popular myths about reverse mortgages and the true facts.
1. Reverse Mortgage Lender Can Take the Home Of The Senior.
This is a total lie. A borrower, or borrowers, will stays as owners of the home, but they have to take care of their responsibilities. A most important duty is to pay the property insurance and taxes. If he or she will leave these unpaid, the lender has the right to either take the sums from the payments to the senior, or to take the home and sell it to get the needed money.
2. A Borrower Will Owe More Than The Value Of The Home.
This is not true. All types of reverse mortgages include the obligatory mortgage insurances. When the loan running time is over, a home will be sold and the loan capital, accrued interests and all fees will be paid from the selling price. If it does not cover the whole amount, a mortgage insurance will pay missing part. The other assets of the borrower nor the assets of the heirs will never be used to pay the reverse loan.
3. The Lender Has The Right To Take The Home.
This is not true. Even when the borrower has used all the money from the reverse mortgage deal, the lender cannot drive him away. As long as the last borrower lives in the home, he has the right to live there. After he will move away, pass away or sell the home, the home will be sold.
4. The Reverse Mortgages Eat The Whole Home Equity.
First, it is impossible to take the reverse loan, which has the same sum than the home equity, i.e. 100 % loans are impossible. The home price increases favour the owner and especially when the running time is a long one, this has a meaning. Additionally the lender has to prepare an Amortization Schedule, where a borrower can see, how the debt amount will grow.
5. The Lender Will Accept, How The Money Will Be Used.
This is a myth. The lender is not interested, how the senior will use the money, because the home equity and the mortgage insurance will guarantee, that he will get everything a borrower owes.
6. The Borrower Has To Pay The Difference, If The Home Selling Price Will Not Cover The Whole Sum Owed.
No, the only assets, which are used to pay the reverse mortgage debts are the home selling price and in some cases the mortgage insurance.
7. The Children And The Heirs Have To Pay A Part Of The Debt.
The reverse mortgage is a not a personal loan, which means the home equity and the mortgage insurance are the only source of the money to cover the debt.
8. It Is Impossible To Qualify For The Reverse Loan, If A Borrower Has Still A Usual Mortgage Unpaid.
This is also an urban legend. The system goes so, that when the borrower agrees to take a reverse loan, he or she will first pay away the usual mortgage after which there will be only one mortgage left. The benefit is, that a senior will get more disposable cash every month.
9. The Social Security Or Other Social Benefits Will Be In Danger.
The fact is, that the payments from the reverse loan program are the usages of the loan, not income. They are tax free, which means that the social securities are not in danger. It is important to guarantee, that you spend the received amount during the same month. It is, however, wise to talk with a reverse mortgage counselor.
10. The Seniors With Some Assets Will Never Qualify.
This is not true. The qualification has been made really easy. If a senior owns a home, where he lives permanently and he is 62 or over, he will qualify. The credit score or the income statements have no meanings, because the home equity is the element, which interests the lender. Maximum three seniors can become the borrowers, but everybody must fulfill the qualifications.
Juhani Tontti, B.Sc., Has Built An Expertise About The Reverse Mortgages And Wants To Share This Reverse Mortgage Information To The Seniors.
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