Know the truth about reverse mortgages. There are many misconceptions about reverse mortgage products; one of the most prevalent is that the lender owns the home.
There was an explosion in the mortgage markets in 2006. One of the most controversial, at the time, was the reversed mortgage. People worried that it targeted senior citizens and was something that would be used to take their homes. After investigations by the federal government, it was found that these mortgages are a great way for seniors to stay in their homes and gain an income. These investigations helped to expose the misconceptions behind reverse mortgage and who owned the home.
Does the Lender Own the Home?
No. The homeowner retains ownership of the property, not the banks or lender. The owner can sell the house, make improvements, live on the equity payments. The lender never takes ownership of the home. Most people thought that the lender only made money by taking ownership and selling the house. This is not true. The loan is only paid once the home has been vacated for a 12 month span, the owner sells the home, or the owner passes away. The lender can sell the house once the owner is gone, to recover the loan amount, plus their interest.
Can the Lender force the Borrower from the Home?
Absolutely not. There are strict guidelines to how the lender can come into possession of the property. The two key reasons are the death of the owner and the owner no longer living in the property. Since lenders only make money based on the sale of the property, it is in their interest to keep the people in the home so prices can appreciate.
What is the Downside?
There are really no downsides. The reverse mortgage is not for everyone. According to Fairway Fast Mortgage Company in Colorado, if you want to leave your home to next of kin, then a reverse mortgage may not be for you. There is nothing stopping the borrower from having life insurance that would allow the next of kin to purchase the home. With the flexibility of payments, reverse mortgages are ideal for many senior citizens.
Knowledge of how reverse mortgage loans work is important. Several misconceptions can be dispelled with a little research. With the growing population of retirees, expect that reverse mortgages will be here for a long time to come.