Reverse Mortgage - Facts Vs MythsMany misconceptions abound about the Reverse Mortgage. When clients are educated, Reverse Mortgages may be the ideal solution for there financial needs.
Myth: The bank owns the home Fact: The homeowner always maintains title ownership and control of their home, and they have the freedom to decide when and if they’d like to move or sell.
Myth: Those with a reverse mortgage will owe more than their house is worth Fact: HomeEquity Bank’s conservative lending practices allow clients to take a maximum of 55% of the home’s appraised value. In fact, 99% of HomeEquity Bank’s clients have equity remaining in the home when the loan is repaid.
Myth: Reverse mortgages are too expensive because the rates are high Fact: HomeEquity Bank rates are modestly higher than regular mortgages because there are no payments required.
Myth: A reverse mortgage is a solution of last resort Fact: Many financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer.
Myth: The homeowner cannot get a reverse mortgage if they have an existing mortgage Fact: For clients that have an existing mortgage, the first step we will take is to pay off your conventional mortgage along with any other secured debt.
Myth: A Home Equity Line of Credit (HELOC) is a better option Fact: HELOCs are a good short-term borrowing option for people who can pay the interest and loan in the near future. However, HELOCs are callable loans with monthly payments and there exists significant risk of non-renewal or cancellation. In comparison, a reverse mortgage is a long-term financial solution that won’t be called based on economic changes such as interest rates increasing, property values decreasing, or a change in the homeowner’s income. Also, money from a reverse mortgage provides the ability to prolong retirement savings.
Myth: The bank can force the homeowner to sell or foreclose at any time Fact: A reverse mortgage is a lifetime product, and as long as property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home, the loan won’t be called even if the house decreases in value. Reverse mortgages provide peace-of-mind that the homeowner can stay in their home as long as they’d like.
Myth: Surviving spouses are stuck paying the loan after the homeowner passes away Fact: Surviving spouses can choose to remain in the home without having to make a payment unless they choose to sell the home.
Reverse mortgages have evolved from a needs-based product to a product many financial planners recommend as an important component of a comprehensive retirement plan.
Currently 2 Canadian lenders offer Reverse Mortgages know as CHIP mortgages and PATH mortgages.
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