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10 Common Myths About Reverse Mortgages
A reverse mortgage can be a great tool for seniors who are looking to access their home equity in retirement. However, there are many myths about reverse mortgages that can scare people away from this option. Some people think that they are too good to be true, while others think they’re a risky investment.
In this blog post, we’ll debunk some of the most recurrent myths and help you decide if this type of loan is right for you. Check out one of our blogs to learn about how someone can benefit from a reverse mortgage.
Here are 10 of the most common myths and the truth behind them:
Myth 1: You can’t get a reverse mortgage if you have an existing mortgage
This is simply not true. You can actually have both a traditional mortgage and a reverse mortgage at the same time. However, you will likely have to pay off your existing mortgage with the proceeds from the reverse mortgage.
Myth 2: The bank owns your home
Once again, this is false. You remain the owner of your home with a reverse mortgage. The loan is secured by your home, but you still have all the rights and responsibilities of ownership.
Myth 3: They are expensive
While it’s true that there are some fees associated with taking out a reverse mortgage, such as origination fees and closing costs, these can often be financed into the loan. This means that you won’t have to come up with any money out of pocket to get the loan.
Additionally, there are no monthly payments required with a reverse mortgage, so you don’t have to worry about making payments every month.
Myth 4: You have to make monthly payments
Nope! With a reverse mortgage, you don’t have to make any monthly repayments. The loan is only repaid when you sell the property or pass away.
Myth 5: Reverse mortgages are only for people who are struggling financially
This is yet another popular myth, but it couldn’t be further from the truth! While a reverse mortgage can provide some financial relief for someone who is struggling to make ends meet, it’s not just for people in financial difficulty.
In fact, many people use the money for other purposes, such as making home improvements or travelling. It can also be a good way to supplement your income in retirement or to get access to cash if you need it for a large purchase.
Myth 6: You need to have a good credit score in order to qualify
Unlike traditional mortgages, there is no minimum credit score requirement when it comes down to determining your eligibility for a reverse mortgage. As long as you are at least 62 years old and own your home outright, or have a low enough loan balance, you should be eligible.
Myth 7: You can outlive a reverse mortgage
False. As long as you live in your home, you will never have to worry about the reverse mortgage loan being called due. It’s only when you sell the property or the last surviving borrower dies that the loan needs to be repaid.
Myth 8: You have to pay taxes on the money you acquire
The money you receive from a reverse mortgage is not considered taxable income. This means that you don’t have to pay any taxes on the money you get from the loan.
Myth 9: The bank can take away my home
This is not true. As long as you stay current on your property taxes, maintain the property in good repair, and are meeting all other requirements for the loan, the bank cannot take away your home. As mentioned earlier, the reverse mortgage loan will only come due if you sell the property, permanently move out of the home, or pass away.
Myth 10: It will affect my Social Security and Medicare benefits
A reverse mortgage will not affect your Social Security or Medicare benefits. These are two separate programs that are not connected in any way to your home equity. However, if you receive Medicaid benefits, those could be affected.
Takeaway:
If you’re considering a reverse mortgage, don’t let these myths hold you back. Reverse mortgages can be a great way to tap into the equity in your home and can give you the financial flexibility you need in retirement. It’s important to do your research to get a better understanding of how they work and to clear up any misconceptions that you may have heard.
At 1st Eagle Mortgage, we want to make sure that everyone has access to the information they need to make informed decisions about their financial future. If you still have questions or would like more information, visit our website to see if a reverse mortgage is a right choice for you.
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