Reverse Mortgages
There are many myths about reverse mortgages that keep senior citizens from using them.
Defined. With a reverse mortgage, a homeowner receives monthly payments from the home's equity via the mortgage company.
Ownership. The participant in a reverse mortgage does not need to give up home ownership. Senior citizens who are cash poor but property rich can take out a reverse mortgage and continue to own and live in their homes. They also continue to pay homeowner's insurance, property taxes, and other costs of maintenance.
Equity. Some think falsely that because a reverse mortgage lets them borrow against the equity in their property that at some point the equity will run out -- and they will lose their homes. Not true. According to Linda Hubbard, vice president of marketing at Transamerica HomeFirst, "A participant can never 'run out of equity' in the sense that there is no longer equity to fund monthly cash advances. Since a reverse mortgage loan is a 'nonrecourse' loan, the lender can only look to the value of the home for repayment when the loan is due, which is when the borrower permanently leaves the home."
More information about how reverse mortgages work is available in a free video from Transamerica HomeFirst, 1 (800) 538-5569, Department W209. Information from The Oregonian.
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