Due to a number of circumstances, homeowners may seek to refinance their mortgage after years of ownership. The original mortgage may no longer be feasible or a homeowner could simply want a better deal to pay off the property. There are several ways to refinance, but one of the most popular is a reverse mortgage. What should you know?
What Is a Reverse Mortgage?
This type of loan enables the borrower to access the unencumbered value of the property. Borrowers are still responsible for property taxes and homeowner’s insurance but with a reverse mortgage, they can access the home equity built up and defer payments on the loan.
Reverse mortgages are often marketed to older homeowners who receive access to a credit line to draw on when they want, in the amount they choose. This option can add more financial flexibility for the homeowner.
Reverse mortgages are popular yet complicated, which often leads to misinformation. We bust three common myths about reverse mortgages.
They’re a Last Resort
Some people believe only homeowners with little money or who have filed for bankruptcy choose a reverse mortgage because they don’t qualify for anything else. In reality, those under intense financial stress won’t even qualify for a reverse mortgage. This loan can be a great addition to an already solid financial plan for retirement.
I’m Giving Up Ownership
A reverse mortgage allows access to your equity without having to give up ownership of the home or taking on a monthly mortgage payment. You will continue to retain title ownership of the home.
I’ll Be Stuck In My Home
Reverse mortgages allow you to stay in your home, but don’t trap you there. Borrowers are able to repay their loans at any time, if they so choose. While reverse mortgages are better suited for people who don’t plan to sell, you can decide to if circumstances change.
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