If you're 62 years of age (or older) and are looking to free up some money each month, a reverse mortgage could be right for you. Specifically, a reverse mortgage is a loan that is based on your home's equity, freeing up cash that you'd otherwise be putting towards monthly mortgage payments. Unfortunately, there are a lot of misconceptions surrounding reverse mortgages and how they work. By getting to know the truth behind some common myths, you can more confidently decide whether this type of loan may be right for you.
Myth #1: You'll Lose Ownership of Your Home
Perhaps the biggest misconception that people have regarding reverse mortgages is that when you take one out, you automatically lose ownership of your home. In reality, your reverse mortgage lender will not take control of your home's title in any way. This means that you retain ownership of your home. The only difference is that your reverse mortgage lender will have a lien on the property until the loan balance is paid back. Meanwhile, there is no need to have a "clear and free" title in order to qualify for a reverse mortgage, either.
Myth #2: Your Heirs Will Be Responsible For the Balance
It's understandable that nobody wants to leave their loved ones with a financial burden when they pass away. The good news is that a reverse mortgage may actually work to the benefit of your heirs. This is because they will have a number of options when it comes to handling your loan, ranging from selling your home to pay off the loan (and pocketing money leftover from the sale) to purchasing the home themselves. Should they choose to buy the home, they can do so for the total loan balance or 95% of its current appraised value. If these two numbers differ, your loved one will pay whichever number is lower.
Myth #3: You're Limited in How You Can Use Your Funds
There are no limits as to how you can spend the money from your reverse mortgage. Some will choose to pay for home improvement projects that will increase the value of the home, whereas others may use it to supplement retirement income or even travel the world.
With all this information in mind, could a reverse mortgage be right for you? Consider speaking with a reputable lender to find out more about all that this type of loan has to offer.
For more information on reverse mortgages, reach out to a loan lender in your area.
When I started my own company, I knew that I needed a little business capital and fast. In an effort to raise money, I worked with various lenders to discuss loans, financing, and special terms. Unfortunately, I quickly discovered that not every loan was created equally. Some loans had almost predatory terms like high interest rates and penalties, while others were completely fair. Fortunately, a business consultant of mine taught me about loans and financing, so that I could make better choices in the future. The information on this blog saved my business, and I know that it can help yours too.