Reverse mortgages have been gaining in popularity due to the unique benefits and flexibility that can come with this type of mortgage. Due to this type of mortgage being fairly new, there are many assumptions and myths that can mislead those that are considering applying for a reverse mortgage.
Myth: You Will Have To Make Large Monthly Payments For The Reverse Mortgage
Individuals will often assume that a reverse mortgage will be similar to a traditional mortgage in the sense that it will require large monthly payments. However, a reverse mortgage is unique in that it does not require payments from the homeowners. Rather, the reverse mortgage is repaid when the individual no longer lives in the home due to either death or moving.
Myth: You Can Stop Maintaining A Home After Getting A Reverse Mortgage
After obtaining a reverse mortgage, some individuals may assume that they will no longer need to be as diligent when maintaining the property. However, reverse mortgages are based on the equity that you have in the home. Therefore, the lender will have a strong incentive to ensure that the home is being properly maintained. Additionally, these mortgages will usually require the homeowner to always have an active homeowner's insurance policy in place. There may be other requirements, but this will largely be determined by the particular reverse mortgage lender.
Myth: It Is Difficult To Pass The Credit Check For A Reverse Mortgage
Individuals with weak credit or that have retired may assume that they will not be able to qualify for a reverse mortgage due to their bad credit history. Yet, these mortgages will typically not require a credit check as they are based entirely on the value of the home. In most instances, the applicant's financial history is primarily reviewed to confirm sole ownership of the property as a home must be free of liens and other ownership conflicts to qualify.
Myth: The Money From A Reverse Mortgage Can Only For Improving The House
An assumption that some individuals applying for a reverse mortgage may have is that they will be limited in their ability to spend the money from the mortgage on things other than the home. However, the funds from these mortgages can be used on anything that the owner wants. Whether it is a vacation, starting a business or making a large purchase, having these funds can give you the freedom to meet your financial needs and goals.