The following article was sent to me by Reverse.Org and I am publishing it as information. I do not endorse reverse mortgages or any type of mortgage plan for that matter. I just think that being informed is the only way to go. I did not receive any financial consideration for publishing this.
I was actually surprised at the way it works. b
Myths and Realities of a Reverse Mortgage
As with many financial products, reverse mortgage loans can be complicated and there may be a number of misconceptions about how the product works.
A reverse mortgage is a loan available for homeowners aged 62 and over. It allows you to access a portion of the equity you’ve built in your home. The loan proceeds can be used for a variety of expenses including car repairs, medical expenses, travel, debt, home improvements etc.
Reverse mortgage loans are insured by the Federal Housing Administration (FHA), and are different from other types of mortgage loans because the borrower uses the loan proceeds to pay off any existing mortgage and does not make monthly mortgage payments.
So what are the other myths vs. the realities?
- Myth No. 1: The lender owns the home.You will retain the title and ownership during the life of the loan, and you can sell your home at any time. The loan will not become due as long as you continue to meet loan obligations such as living in the home, maintaining the home according to the Federal Housing Administration requirements, and paying property taxes and homeowners insurance.
- Myth No. 2: The home must be free and clear of any existing mortgages. Actually, many borrowers use the reverse mortgage loan to pay off an existing mortgage and eliminate monthly mortgage payments.
- Myth No. 3: Once loan proceeds are received, you pay taxes on them.Reverse mortgage loan proceeds are tax-free as it is not considered income. However, it is recommended that you consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits
- Myth No. 4: The borrower is restricted on how to use the loan proceeds. The cash proceeds from the reverse mortgage loan can be used for any reason. Many borrowers use it to supplement their retirement income, delay receiving social security benefits, pay off debt, pay for medical expenses, remodel their home, or help their adult children. You’ve worked hard for this asset and prudence along with budgeting should be the proper approach to enjoying proceeds received from your reverse mortgage.
- Myth No. 5: Only poor people need reverse mortgages. The perception of the reverse mortgage as an assist for the “poor” borrower is changing - many affluent senior borrowers with multi-million dollar homes and healthy retirement assets are using reverse mortgage loans as part of their financial and estate planning, and are working closely in conjunction with financial professionals and estate attorneys to enhance the overall quality and enjoyment of life.
For more information on reverse mortgages feel free to visit the site reverse.org.
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