Reverse Mortgages: Common Myths Debunked

There are a lot of misconceptions about the terms associated with reverse mortgages.

Even with the recommendations provided by the American Association of Retired Persons (AARP), a lot of seniors still worry when it comes to applying for a reverse mortgage loan. Things become worse when their loved ones or friends say that this type of loan is nothing but bad news even though they can’t provide any credible information to back up their claim.

Common Reverse Mortgage Myths

One of the most common misconceptions regarding a reverse mortgage Columbia is that it tends to result into houses being repossessed from the borrowers. This isn’t true. As a matter of fact, the senior borrower would still own the house that’s under the loan program. This ownership is protected by the lien that’s put on the property, just like other types of mortgages. It will guarantee that the lender will be repaid for the owed amount, getting rid of the threat of having the house repossessed.

Because the majority of reverse mortgages are Federal Housing Administration or Home Equity Conversion Mortgages types, the US government provides full protection by using the mandatory 2% insurance fee that can be paid on all of the FHA reverse mortgages.

The other types of reverse mortgage loans are referred to as Proprietary Reverse Mortgage and Federal National Reverse Mortgage Association. Private lenders guarantee them, which makes them safe options.

Another misconception is the idea that a reverse mortgage is costlier than other kinds of mortgages. On the other hand, the closing cost of a reverse mortgage are costlier compared to an FHA mortgage by just 1% when obtained on the exact same property. Traditional mortgages, on the other hand, tend to charge more than 2%.

The interest rates also take on a huge factor in this case. Although traditional mortgages utilize the prime rate as their base, the interest rate of the FHA reverse mortgage loan will depend on the one year the US treasury note. This will show that the interest rate produced through the reverse mortgage is lower than that of a traditional mortgage.

There is also misinformed concept that the house would be handed over to the lender when the borrower passes away or has moved to a different permanent location. This is not true. It follows the exact same procedure as that of a normal mortgage where the home equity will go to the heir of the borrower or the estate.

A reverse mortgage loan needs the estate to pay the lender the home value once the loan’s due comes. The exact same thing applies if the value of the house has decreased or when the borrower reaches extreme old age.

The last misconception about the reverse mortgage loan is that tax will be imposed on it and the borrower’s health insurance and Social Security will be affected. A reverse mortgage loan isn’t an income but a loan. In case you are still in doubt regarding the security that you get through reverse mortgage, you could refer to certain publications from AARP. It is a legitimate body that is involved with reverse mortgages that could give you reliable information.

Call Reverse Mortgage Specialist if you need more information about this type of loan to make sure that it is the right one for you. 

David Stacey
Reverse Mortgage Specialist
Columbia, SC 29205
(803) 592-6010
http://reversemortgagecolumbiasc.com/