With the recent wave of Wisconsin Reverse Mortgages
happening there is a lot of misinformation out there. I
have heard of some really bad reasons not to take out a
reverse mortgage and decided it was time to write about
some of them. Please remember reverse mortgages aren't for
everyone but make sure the reason you aren't investigating
them is not on this list. If you haven't even looked at a
Wisconsin reverse mortgage for any of these reasons please
take another look, it might work for you.
1. When taking out a reverse mortgage I no longer own the
house my bank does. This is untrue because you are kept on
the title as owner of the property. As a matter of fact the
bank can't foreclose on you like a forward mortgage. You
live in the house as long as you can and will always own
the property till you decide to sell. like a regular
mortgage the bank will place a lien on the house to insure
it get paid off but you maintain complete control of the
house.
2. My children won't get anything when I pass. Your estate
only owes as much a the mortgage balance is at the time of
payoff. The payoff is however much you have spent plus
interest. Any equity that is left over is passed on to your
heirs. the bank does not get too keep any of this extra
equity. As an easy example if you owe 25,000 on the reverse
mortgage and the house os worth 125,000 and it was sold.
You would get the extra 100,000 not the bank or anyone
else. The lender would get paid there 25,000 they have
given you.
3. I could get forced out of my home by my bank. FHA/HUD
reverse mortgages specifically state that you can not be
forced out of your home.
4. Social Security and Medicare will be affected by the
money I receive from the reverse mortgage. This money is
actually considered a loan and not income. For this reason
a reverse mortgage does not lower Social Security or
Medicare benefits like some want you to think.
5. I must have really good credit and income to qualify for
a reverse mortgage. Actually it is a lot easier to qualify
for a reverse mortgage than a forward mortgage that you
have had in the past. Since there are no payments you don't
need income to qualify. As for credit the only thing that
is looked at is if you are currently going through a
bankruptcy you may not qualify. If you have bad credit you
will still qualify for a reverse mortgage.
6. My home must be free and clear with no mortgages to be
able to get a reverse mortgage. No, you can have a mortgage
and still qualify for a reverse mortgage. You will pay off
the current mortgage with your new reverse mortgage and
will be getting rid of the previous mortgage payment. You
must have enough equity to pay the mortgage off completely
and you will have to use some of your available cash to do
so.
7. There are large out-of-pocket expenses which make it
hard for seniors to get the loan. All of the costs, whether
closing costs or interest, are financed. That means there
are few out-of-pocket expenses at any point in the reverse
mortgage.
8. Reverse mortgage interest rates are higher than a
regular mortgage. This is just not the case. In most cases
the reverse mortgage has a lower rate than the current
conforming fixed rate. The HECM product's interest rate is
set by the Federal government.
9. I might "outlive" the loan (don't we all wish for
that?). FHA/HUD reverse mortgages are designed specifically
so that you can't outlive the loan. When you get the
reverse mortgage, the lender will charge you 2% to purchase
mandatory FHA mortgage insurance. That insurance guarantees
that even if you live to be 100, you can never owe more
than the value of your home and you can never be forced to
leave.
10. A reverse mortgage is like a home equity loan. First,
home equity loans may have many requirements such as high
income, low debt, and good credit that a reverse mortgage
does not. Second, you can "outlive" a home equity loan and
end up being foreclosed on by the bank. This can never
happen with a reverse mortgage. Third, a reverse mortgage
usually has significantly lower interest rates.
Those were ten of the biggest misconceptions out there
about reverse mortgages. I am sure I missed some but the
key is get with a good reverse mortgage expert and they
will be able to answer your questions. There are many
resources that will help educate, I suggest you do some
reading!
----------------------------------------------------
David Forer is an expert on Wisconsin Reverse Mortgages
with over 15 years doing mortgages in the state. He has a
free informational e book on Reverse Mortgages at
http://www.wisconsinreversemortgages.net/ebook.html
this
is not a sales book!
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