What if I already have a mortgage, do I still qualify?
One of the more popular reasons why people get a reverse mortgage is actually to pay out their existing mortgage. By doing this they release themselves of the burden of a monthly mortgage payment.
Please keep in mind that any secured loans on the property must first be paid out and you only get to keep the leftovers.
Sometimes there isn’t any leftovers from the reverse mortgage advance. Even in this situation the homeowners would benefit greatly from not having to make a ongoing mortgage payment.
The rates are too high
by direct comparison there is no doubt that the interest rate are higher than what you would potentially get with a Home equity line of credit or a traditional mortgage. However you are comparing apples to oranges because traditional mortgages have much lower risk to the lender. Clients need to qualify for them and also make regular payments. If you stop making payments you will lose your property.
On the other hand a reverse mortgage does not require any payments, and you have no risk of losing your property. The result of having this Privilege is a small rate premium, which are still lower than Unsecured loan rates and credit cards.
I will lose equity in my home
Because interest grows over time of course a common concern is that you will lose equity in your home over time. This is a legitimate concern, but many people forget that the home will be appreciating overtime as well.
The simple fact is that many people in actually have their home equity increase while they hold a reverse mortgage. This is because homes are appreciating at higher rates than the interest on the reverse mortgage. Think about it like this, 100% of the value of the home increases over time while the interest paid accumulates on the much smaller loaned amount.
My family will not like it
Of course family situations will vary from family to family and from person to person. However we have normally seen that reverse mortgages are initiated by family members and well supported by them. In addition we have also seen:
The money being used as an early inheritance
The money being used as down payments for family members to purchase a home.
I’m going to lose my house
The first thought that comes into everyone’s head is that you will lose your home. On the other hand the product was actually designed to let you stay in your home for life. Nobody has ever lost their home because I’m getting a reverse mortgage, it is mathematically impossible.