Dispelling The Myths About Reverse Mortgages

The misconceptions regarding the terms of reverse mortgages astound me to no end. Despite the recommendations received from the American Association of Retired Persons (AARP), the idea of applying for a reverse mortgage continues to elicit worry among seniors. Its even exacerbated by friends who declare reverse mortgages to be bad news despite lacking credible information about the matter.

In this article, we're going to dissuade the myths about reverse mortgages that continue to permeate through the collective consciousness of our seniors.

1. The most common misconception about a reverse mortgage is that it often leads to the homes being taken away from the borrowers. This is not true. In fact, the borrower will have perpetual ownership of the home that is under the reverse mortgage program. This ownership is made more secure by the lien that is placed on the property, just like any other mortgage. It guarantees that the lender will always be repaid for the amount owed, removing the threat of having the home removed from the borrower.

Since most reverse mortgages are Federal Housing Administration Home Equity Conversion Mortgage (HECM) types, full protection by the US government is assured through the use of the mandatory 2% insurance fee that is payable on all FHA reverse mortgages.

The remaining types of reverse mortgages are called the Proprietary Reverse Mortgages and Federal National Mortgage Association. These are also safe as guaranteed by private lenders.

2. The next big misconception is the notion that a reverse mortgage is more expensive than other types of mortgages. On the contrary, a reverse mortgage's closing costs are pricier than an FHA mortgage's by only 1% if obtained on the same property. Conventional mortgages, on the other hand, charge more than 2%.

The interest rate also plays a big factor here. While conventional mortgages use the prime rate as their base, the FHA reverse mortgage interest rate depends on the one year United States Treasury Note. This clearly shows that the interest rate generated through the Reverse Mortgage is much lower compared to that of a conventional mortgage.

3. There's a common misinformed notion that the home will be given to the lender once the borrower has died or has moved to another permanent location. This is an outright lie. It actually follows the same procedure as a normal mortgage where the equity actually goes to either the estate or the heirs of the borrower.

As a non-recourse agreement, a reverse mortgage requires the estate to pay the lender the value of the home at the time of the repayment. The same thing applies in the case of a decrease in the value of the home or if the borrower reaches extreme old age.

4. The last misconception is that a tax is imposable on a reverse mortgage and that Social Security and health insurance are affected by the terms. In the first place, a reverse mortgage is not an income, but a loan. That alone is the clincher in this argument.

If you are still in doubt about the security that you get through mortgages, you can refer to specific publications from AARP. It's a legitimate body involved with reverse mortgages that can provide you reliable information.

Other Reverse Mortgage and Your Life Articles

Dispelling The Myths About Reverse Mortgages
Reverse Mortgages: Their Advantages And Disadvantages
Reverse Mortgages: What Are Some Of The Most Common Misconceptions
Reverse Mortgages Why Seniors Must Get It
Pros And Cons Of Reverse Mortgages
The Downside Of Reverse Mortgage
The Monetary Aspect Of Reverse Mortgage
Is Conversion Mortgage For You? Know The Disadvantages Of Reverse Mortgages
An Overview Of Reverse Mortgage
Things You Should Know About Interest Rates In Reverse Mortgages
What Does Non-Recourse Reverse Mortgage Mean?
National Council On Aging On Reverse Mortgage
The Benefits Of Reverse Mortgage
Reverse Mortgages: The What, The Who And The How
Tips To Consider Before Getting Reverse Mortgages
Are There Any Dangers On Reverse Mortgages?
The Reverse Mortgage Process
Reverse Mortgages: The Advantages To Your Lifestyle
How Reverse Mortgage Can Affect Existing Benefits And Loans
Counselling: An Imperative Step In The Reverse Mortgage Process
Payment Options For Reverse Mortgages
How Reverse Mortgages Work
Qualifications Of A Reverse Mortgage
Things You Should Know About Reverse Mortgages
Why Reverse Mortgages Are Good Loan Options?

Reverse Mortgage and Your Emotions Videos

Site Index Page * Home Page * Privacy Policy * Conditions * Disclaimer * Contact

Disclosure: Advertisements are placed on this website to offset the cost of maintenance and to keep this site free for everyone to use. Owners of this website will receive compensation for products and services purchased through featured advertisements.
All claims of actual user results should be considered as a-typical.

© 2011 Copyrighted by OkiDoki - All Rights Worldwide Reserved!
Site and articles redirected and transformed by Hans Peter M. Mul