Reverse mortgages are indeed a complex topic. But, you should not let the myths surrounding it make you more confused. Instead, know the facts behind each misconception so you can have more informed decisions when it comes to your finances.
Reverse Mortgages Myths
- Reverse mortgages are expensive. A reverse mortgage can be a better option than a traditional mortgage because it eliminates the required mortgage to be paid on a monthly basis. With a traditional mortgage, you will be obligated to make a monthly payment. A reverse mortgage offers a more sophisticated element than a traditional mortgage. It is known as a Mortgage Insurance Premium (MIP). It provides more flexibility for equity access with a non-recourse loan and insures your loan, too! Before believing that MIP makes a reverse mortgage expensive, make sure to check first the numerous benefits it can give. Being expensive can mean higher quality and more benefits. A reverse mortgage can definitely establish long-term insurance and a convenient way to preserve your property.
- Reverse mortgages are usually intended for taking a holiday. While there’s really no hard rule on what you can use the loan for, reverse mortgages are usually intended for immediate needs and practical reasons. Some of the most common uses for this loan are to pay off an existing mortgage, outstanding debt, buying maintenance medications, or even for home improvement. Simply put, reverse mortgages are for supporting your needs during your golden years, not so much of the wants.
- The reverse mortgage becomes due when the homeowner becomes sick and needs to be in a care facility. The reverse mortgage will stay in place no matter what happens, unless the last surviving borrower dies, sells the home, or does not live in the home for a year. If the situation is applicable in any of those scenarios, then the reverse mortgage becomes payable and due. So if one spouse becomes ill and is admitted to a care facility or hospital, the reverse mortgage will continue to maintain a steady cash flow.
- Medicare and Social Security will be affected by a reverse mortgage. There will be no significant effect or change in your Social Security and Medicare benefits. For Medicaid, however, eligibility will depend on the amount withdrawn from the reverse mortgage each month. The limit also varies, so consult a financial expert regarding this.
- When a homeowner dies, the heirs must pay off the loan, which may exceed the home’s market value. Being a non-recourse loan, the reverse mortgage does not require the surviving family to pay off debt. The family does not need to worry about anything, even if the loan balance is greater than the home value. To pacify your fears, a reverse mortgage allows homeowners to be the sole owner of the property. Even lenders can’t have their hands on the title.
A reverse mortgage can be surrounded by several misconceptions making it hard for some people to trust the benefits and opportunities it can provide. Now that we have debunked those myths, you can now appreciate the benefits of a reverse mortgage on your retirement years.
Apply For a Reverse Mortgage at New Frontier Financial Inc.
Need more information about reverse mortgages in Dallas? New Frontier Financial Inc. can help! We provide mortgage services and help you achieve your goal in refinancing or purchasing your dream home. Contact us today at (469) 886-8300!