With the popularity of the reverse mortgage rising in recent years, there many myths that have surfaced, too. We’ll help you better understand what is what with this quick breakdown of reverse mortgage myths and facts.
Reverse mortgages are a popular way to cash out the equity on your home once you reach a certain age. They do have some restrictions, like you have to be over the age of 62, occupy your home as your primary residence and have plenty of equity in your home in order to qualify. They are a wonderful option for tapping that equity you’ve worked so hard to earn. The loans are not income-based and do not get repaid until after you’ve passed away. Keep reading as we shed some light on common reverse mortgage myths and facts.
Reverse Mortgage Myths and Facts
MYTH: You could lose your home.
FACT: You keep the title during the lifespan of the loan. As long as you pay the taxes and insurance premiums that are due and you maintain the home, you cannot be forced to vacate it.
MYTH: You don’t have to pay the loan back.
FACT: You will have to repay the loan. If you relocate, sell your home or you die, the loan will be repaid from the sale of the home. You can sell the home at any time you like, but the balance and interest will be paid before you are issued a check for any remaining equity.
MYTH: Your home must be paid off for you to qualify.
FACT: When you get a reverse mortgage, you are cashing out a portion of the available equity in your home. Even if you have a second mortgage, you can still use those funds to pay off the Jr. loan. The funds will also pay off any balance you currently on an existing mortgage with the difference going to you.
MYTH: Your adult children will be upset that you took out a reverse mortgage.
FACT: In most cases, adult children are thrilled that their parents have a sizeable nest egg to fall back on. When all is said and done, it’s your home, your equity and your adult decision.
MYTH: You could end up underwater on your home loan.
FACT: There are fail-safes in place that prevent this. You can only borrow so much of equity, an amount that is leveraged against what you owe on the home and what the home is worth.
MYTH: There are guidelines for how you can use the cash.
FACT: You can use the cash from your reverse mortgage in any way that you see fit. There are no restrictions. It’s your cash.
MYTH: Reverse Mortgages are only good for people who did not plan well for retirement.
FACT: Reverse Mortgages are wonderful financial options that are commonly used to increase cash flow and upgrade quality of living. Why hinder your budget at all when you have access to the equity that you’ve earned?