3 Myths About Reverse Mortgages

Reverse mortgages are a great way to borrow on your home to pay off large bills and medical expenses. But if you're trying to find out if it's the right choice for you, you may be flooded with a lot of myths and misinformation about what one really is. Here are three of the most common myths associated with reverse home mortgages. Some of the myths are false, and others are only partially false, so make sure you read all the terms before you sign a reverse mortgage.

* Myth #1) Debt is a Deal Breaker

The first is that there must be no debt on the house prior to purchase. While you may have problems getting a reverse home mortgage if you've just purchased the home or have a large amount of debt already levied on the property, a reverse home mortgage can be taken out on a home that still has a mortgage on it. As long as there is sufficient equity for the home, you can still get a reverse mortgage.

* Myth #2) You Can Get Kicked Out of Your House Because of Your Reverse Mortgage

Another common myth is that you can lose your house due to the reverse mortgage. You cannot lose the house as long as the borrowers are still alive and live in the house. The loan does not become due until the last borrower dies or moves out of the house. You can lose the house, however, if the taxes or insurance are not paid, or the condition of the house deteriorates.

* Myth #3) Owing More Than The Value of Your Home

The last most common myth is that the borrower could end up owing more money to the lending firm than the house is worth. Since the loan is not higher than the value of the house, the bank can't borrow more than the house is worth. So when you or your heirs sell the house after you move or pass away, the bank cannot collect more money than they would receive from the sale of the house.

By: Kevin P. Thompson

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