Reverse Mortgage Research Paper
With hundreds of daily messages produced from financial institutions and mortgage organizations, it is often difficult to separate it all. What is good? What messages have a hidden agenda? Much of the information made available to seniors is beneficial except when true information begins overlapping with myths. The myths will cause seniors to become very weary of reverse mortgages and often question every source from which they receive information. There are many myths floating in the air and it is time to dispel these myths with honesty and facts once and for all.
Recent research indicates several myths that seniors are concerned about prior to deciding if a reverse mortgage is the best decision for their family and home. The following examination will clarify these myths and will …show more content…
offer some relief to those who have been delaying a reverse mortgages due to inadequate information.
Myth 1: The senior needs good credit to qualify for a reverse mortgage
Reverse mortgages are made available to seniors because they require absolutely no payment for as long as the senior lives in their home. Because no payment is required, the senior's credit is not an issue. The only time the senior's credit will be taken into account is if he/she has an IRS tax lien or anything that would hinder the current title.
The credit check is actually at the end of the application rather than the beginning, illustrating just how it ranks in the process. The senior's income is also something that is not a deciding factor with reverse mortgages. The purpose of a reverse mortgage is to offer the senior more available cash, their current income is irrelevant. There are only three main factors considered with a reverse mortgage: the age of the applicant, the current value of their home and the expected interest rate of the loan; so credit and income are in the clear.
Myth 2: The senior must own their home free and clear to be eligible for a reverse mortgage.
Typically seniors must have at least 50 percent equity accrued with their home.
This in no way means that they have to own free and clear. With this minimum amount of required equity, the senior will begin maximizing on the benefits of a reverse mortgage.
Myth 3: The senior is limited on how they spend the money from their reverse mortgage.
This is the worst myth yet. There are no restrictions on how the senior spends their cash from the reverse. In fact, they have several different options with how they receive the money to better accommodate their individual lifestyle. New car payments, college for grandchildren, home repairs, medication/ long-term care and investments just name a few ways in which seniors choose to spend the money from their reverse mortgage. Clearly, the possibilities are endless.
The senior has just as much flexibility with how they choose to receive the money. They can choose individually or combinations from the following: lump sum distribution, term payment, tenure payment (fixed monthly payment for the rest of their life) or a line of credit where the money can be spent when needed. How ever the money is distributed, the senior chooses what is best for
them.
Myth 4: The senior will end up leaving a huge debt for their heirs to manage.
This myth definitely creates some confusion both for seniors and their adult children and could quite possibly be one of the largest deterrents for those interested in a reverse mortgage. This will bring some relief to those who are concerned with the debt left from a reverse mortgage.
The reverse mortgage is accompanied by monthly mortgage insurance and other services which keep the home at its current market value. More simply stated and all technicalities set aside, the heirs will never owe more than what the home is worth. And, if the heirs choose to sell the home, then the remaining equity after the sell will allow additional funds to be distributed to the senior's estate.
Myth 5: When the senior receives a reverse mortgage, they give up ownership of their home to the bank.
It is not common practice in a traditional mortgage for the bank to take the title and ownership of a home, reverse mortgages are no different. With a reverse mortgage, the title will remain in the name of the homeowner. By no means is the senior married to a reverse mortgage. If in a few years they realize they no longer wish to live in their home, they can sell their home and pay off the reverse balance. It is important for the senior to remember they always have choices and are never stuck.
At last, these myths about reverse mortgages have been cleared up once and for all, its time to tell others about this well respected program. Time to get this information to those who will benefit from it, because there is nothing better than being armed with the information you need to facilitate good decision making.
Recent research indicates several myths that seniors are concerned about prior to deciding if a reverse mortgage is the best decision for their family and home. The following examination will clarify these myths and will …show more content…
offer some relief to those who have been delaying a reverse mortgages due to inadequate information.
Myth 1: The senior needs good credit to qualify for a reverse mortgage
Reverse mortgages are made available to seniors because they require absolutely no payment for as long as the senior lives in their home. Because no payment is required, the senior's credit is not an issue. The only time the senior's credit will be taken into account is if he/she has an IRS tax lien or anything that would hinder the current title.
The credit check is actually at the end of the application rather than the beginning, illustrating just how it ranks in the process. The senior's income is also something that is not a deciding factor with reverse mortgages. The purpose of a reverse mortgage is to offer the senior more available cash, their current income is irrelevant. There are only three main factors considered with a reverse mortgage: the age of the applicant, the current value of their home and the expected interest rate of the loan; so credit and income are in the clear.
Myth 2: The senior must own their home free and clear to be eligible for a reverse mortgage.
Typically seniors must have at least 50 percent equity accrued with their home.
This in no way means that they have to own free and clear. With this minimum amount of required equity, the senior will begin maximizing on the benefits of a reverse mortgage.
Myth 3: The senior is limited on how they spend the money from their reverse mortgage.
This is the worst myth yet. There are no restrictions on how the senior spends their cash from the reverse. In fact, they have several different options with how they receive the money to better accommodate their individual lifestyle. New car payments, college for grandchildren, home repairs, medication/ long-term care and investments just name a few ways in which seniors choose to spend the money from their reverse mortgage. Clearly, the possibilities are endless.
The senior has just as much flexibility with how they choose to receive the money. They can choose individually or combinations from the following: lump sum distribution, term payment, tenure payment (fixed monthly payment for the rest of their life) or a line of credit where the money can be spent when needed. How ever the money is distributed, the senior chooses what is best for
them.
Myth 4: The senior will end up leaving a huge debt for their heirs to manage.
This myth definitely creates some confusion both for seniors and their adult children and could quite possibly be one of the largest deterrents for those interested in a reverse mortgage. This will bring some relief to those who are concerned with the debt left from a reverse mortgage.
The reverse mortgage is accompanied by monthly mortgage insurance and other services which keep the home at its current market value. More simply stated and all technicalities set aside, the heirs will never owe more than what the home is worth. And, if the heirs choose to sell the home, then the remaining equity after the sell will allow additional funds to be distributed to the senior's estate.
Myth 5: When the senior receives a reverse mortgage, they give up ownership of their home to the bank.
It is not common practice in a traditional mortgage for the bank to take the title and ownership of a home, reverse mortgages are no different. With a reverse mortgage, the title will remain in the name of the homeowner. By no means is the senior married to a reverse mortgage. If in a few years they realize they no longer wish to live in their home, they can sell their home and pay off the reverse balance. It is important for the senior to remember they always have choices and are never stuck.
At last, these myths about reverse mortgages have been cleared up once and for all, its time to tell others about this well respected program. Time to get this information to those who will benefit from it, because there is nothing better than being armed with the information you need to facilitate good decision making.