How Do Reverse Mortgages Work? Myths & Truths Explained
How do reverse mortgages work in your favor? This is a very important question you need to answer before you decide to take on a reverse mortgage. This type of federally insured loan allows you to have extra retirement funds or income without the fear of losing your home. Reverse mortgages allow homeowners to retain ownership of their home while borrowing money against the value of their home. It also gives the added benefit of not making any mortgage payments during the duration of the loan. Your only obligation is maintain your home and pay your home insurance and property tax. Instead of repaying the loan monthly, the loan balance is repaid when all borrowers have left the home.
Contact us today to learn more about reverse mortgages from the experts at Advantage Home Loans Corporation.
Reverse Mortgages Qualifications
- Age Qualification: To qualify for a reverse mortgage, the borrower on the title needs to be at least 62 years old. A non-borrowing spouse may be under age 62. More funds may be available through reverse mortgages depending on the borrower’s age.
- House Ownership & Residence: The borrower must be the owner of the house and it must also be their primary residence.
Common Myths About Reverse Mortgages
So how do reverse mortgages work? The facts are often confused with some myths and fallacies. Here are some common misconceptions about reverse mortgages:
Taking out a reverse mortgage will give lenders ownership of my home
This statement is far from the truth. Reverse mortgages do not give lenders the power to possess your home. You will retain ownership of your home as long as the borrower continues to live in your home as their primary residence. You can choose to sell your home at any time you wish, and the lender cannot force you from your home as long as you meet certain obligations. For example, you are required to adhere to stipulations such as continuing to pay your property tax and homeowner insurance as well as to maintain your home.
Children or heirs are liable for the debt incurred through reverse mortgages
Again, this is another common myth! A reverse mortgage is a type of non-recourse loan. This means that your house and its value on resale or refinancing is the only compensation lenders will get upon maturity of reverse mortgages.
There must be no outstanding amount owed on my home to qualify for a reverse mortgage
You can still apply and qualify for reverse mortgages even if there is an outstanding mortgage on your home. Whatever amount is owed will paid from your total loan amount and the remainder will be the amount that you receive through your reverse mortgage.
Credit rating is a qualification for reverse mortgages
This is another common myth about how reverse mortgages work. Your credit rating is not considered when applying for a reverse mortgage. The only time a credit report will be generated is to check whether you have any unpaid government debt. If this is the case, a portion of the funds from reverse mortgages can sometimes be used to pay off any outstanding financial obligations.
A Reverse mortgage means that I will owe more money
Although classified as a loan, acquiring reverse mortgages does not equate to having an outstanding debt. Instead, what you are collecting is unliquidated equity from your home. As people reach retirement age, most of their financial assets are tied up in their place of residence. Unless they sell their house, they will not be able to use the money they paid for their home. Reverse mortgages give you the benefit of turning the money tied to your home as fund you can use in retirement without selling your property.
Contact Us for More Information on Reverse Mortgages
Now that you know some of the myths and common misconceptions about reverse mortgages, it is time to act! Contact us at Advantage Home Loans Corporation today to speak with one of our knowledgeable representatives to learn more and to find out how much you can get from a reverse mortgage.