Reputation and Reality
Before taking any loan, it’s important to research and fully vet the product and its terms. That means asking hard questions and making sure you are comfortable with the answers. In this section we take a closer look at federal reverse mortgage regulations and discuss some common misconceptions about the loans and industry.
- Misconception 1: The lender takes ownership of the home. In reality, the lender will put a lien on the property, but the borrower retains the title and ownership throughout the duration of the reverse mortgage so long as they comply with the terms of the loan.
- Misconception 2: Reverse mortgages can easily lead to foreclosure. As long as the borrower meets the loan’s requirements, such as paying property taxes and maintaining insurance, the home remains theirs. If the borrower fails to comply with the loan terms, the lender can foreclose on the property.
- Misconception 3: Reverse mortgages are only for desperate homeowners in financial distress. In reality, reverse mortgage borrowers must demonstrate a certain level of solvency before they are granted the loan. Contrary to popular perception, many financially savvy individuals have used reverse mortgages as a strategic part of their retirement planning.
- Misconception 4: Reverse mortgages are prohibitively expensive. While they do have unique costs, when managed properly, reverse mortgage expenses are comparable to those for other types of home loans.
- Lenders are now required to conduct financial assessments to ensure borrowers can meet their obligations, like property taxes and insurance.
- Eligible non-borrowing spouses can remain in their homes upon the borrowing spouse's death.
Reverse mortgage proceeds may be used to cover unexpected expenses, fund home improvements, or even diversify investment portfolios, giving retirees more control over their cash flow and financial planning.
*The borrower must meet all loan obligations, including living in the property as the principal residence, maintaining the home, and paying property charges, including property taxes, fees, hazard insurance. If the homeowner does not meet these loan obligations, then the loan will need to be repaid.
Common Concerns
Everyone has an opinion. Separate the facts from the fiction and learn the truth about reverse mortgages.
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