Reverse Mortgages: Common Myths Debunked

reverse mortgageThere are a lot of misconceptions about the terms associated with reverse mortgages. Even with the recommendations provided by the American Association of Retired Persons (AARP), a lot of seniors still worry. Their concerns come from applying for a reverse mortgage loan. Things become worse when their loved ones or friends say that this type of loan is nothing but bad news. Even though they can’t provide any credible information to back up their claim.

Common Myths About Reverse Mortgages

There are many misconceptions regarding a reverse mortgage. One example is that it tends to result into houses being repossessed from the borrowers. This isn’t true. As a matter of fact, the senior borrower would still own the house that’s under the loan program. This ownership is protected by the lien that’s put on the property, just like other types of mortgages. It will guarantee that the lender will be repaid for the owed amount, getting rid of the threat of having the house repossessed.

Majority of reverse mortgages are Federal Housing Administration or Home Equity Conversion Mortgages types. The US government provides full protection by using the mandatory 2% insurance fee that can be paid on all of the FHA reverse mortgages.

The other types of reverse mortgage loans are referred to as Proprietary Reverse Mortgage and Federal National Reverse Mortgage Association. Private lenders guarantee them, which makes them safe options.

ConwayIs It A Costly Option?

Another misconception is the idea that a reverse mortgage is costlier than other kinds of mortgages. On the other hand, the closing cost of a reverse mortgage is costlier compared to an FHA mortgage by just 1% when obtained on the exact same property. Traditional mortgages, on the other hand, tend to charge more than 2%.

The interest rates also take on a huge factor in this case. Although traditional mortgages utilize the prime rate as their base, the interest rate of the FHA reverse mortgage loan will depend on the one-year US treasury note. This will show that the interest rate produced through the reverse mortgage is lower than that of a traditional mortgage.

Will The Lender Take The House?

There is also a misinformed concept that the house would be handed over to the lender when the borrower passes away or has moved to a different permanent location. This is not true. It follows the exact same procedure as that of a normal mortgage, where the home equity will go to the heir of the borrower or the estate.

A reverse mortgage in Myrtle Beach needs the estate to pay the lender the home value once the loan’s due comes. The exact same thing applies if the value of the house has decreased or when the borrower reaches extreme old age.

How About The Tax?

The last misconception about reverse mortgage loans is that taxes will be imposed on them and the borrower’s health insurance and social security will be affected. A reverse mortgage loan isn’t an income but a loan. In case you are still in doubt regarding the security that you get through reverse mortgage, you could refer to certain publications from AARP. It is a legitimate body that is involved with Myrtle Beach reverse mortgages that could give you reliable information.

Call David Stacy Reverse Mortgage Specialist if you need more information. We’ll help you find out if reverse mortgages are right for you.

David Stacy Reverse Mortgage Specialist
Myrtle Beach, SC 29577
(843) 491-1436

We serve all of Horry County including: North Myrtle Beach, Carolina Forest, Socastee, Forestbrook, Conway, Surfside Beach, Little River, Myrtle Beach, Forestbrook