A reverse mortgages are unique in its nature & its continuing attraction more people are opting for this loan. However, due to its popularity people are getting misinformation or myth from several sites & lenders.
Luckily, now more and far better information is available today then before. As the people exploring more about reverse mortgages people continue to be in falsehood and getting wrong information.
Some of the misconceptions are as follows:-
I. Borrower can lose there house or bank can forfeit there house.
As a title described reverse mortgage, misconception is that borrower will lose his/her house. This is simply a myth, borrower can’t force out to leave his/her house as long as borrower is paying taxes, insurance are paid. The living conditions are quite realistic.
If the last borrower leaves the home, loan has to compulsorily pay though. Generally, assets secured by reverse mortgages still have equity even then maturity event occurs
and consequently borrower or his/her heirs wants to sell there home to pay loan and conserve this equity for the benefit of borrower.
II. There is a condition if borrower wants reverse mortgage then his/her home must be debt free.
Reverse mortgages convert home equity into cash. There should be sufficient equity in property; the owner of a house can be eligible for reverse mortgage. Many people use reverse mortgage to pay for an existing mortgage in order to write off the requirement of monthly payment of mortgage.
III. If bank sells the home or reverse mortgage becomes outstanding.
All it depends upon the borrower. The decision is of borrower regarding retaining of title not the bank or the lender. It is general for borrower or the heirs of borrower to sell home to repay the loans. Other option of refinance of home is available in order to repay the loan.
IV. It is beneficial to move in less expensive home.
The analysis can be done and make tactic for different reasons for assuming the mortgage which will able to cut the cost.
The process of selling house and moving in new home will become an expensive deal. The commission may be 6% on GBP 3, 00,000 on real estate commissions and it would cost GBP 18,000. Moving into the new house is also not a easy task to do.
V. There are some limits on which how the money is used.
In fact there are no such limitations. The cash taken for reverse mortgage can be applied for any purpose. The guidance of financial advisor must be taken.
Many borrowers spend reverse mortgages on there traveling, paying off old debts, other day to day needs or purchasing new car etc.
VI. Taxation Policy
The cash processing from reverse mortgage are tax free because it’s money of borrower. Help can be taken from the Financial Advisor
