Bob Kutchbach, owner and broker of Carleton Realty, explains reverse mortgages. Bob dispells a big myth and outlines how a reverse mortgage can benefit retirees without losing their equity.
The biggest myth surrounding a reverse mortgage is that the bank gets your home at the end of the mortgage. This is not true! The mortgage is treated like any other, you either pay off the loan at the end or you sell and pay off the loan and any other equity is yours. The great thing about this loan is that most people are using them to downsize or rightsize to a home that better suits their needs as they age.
Many people wonder how a reverse mortgage works. The homeowner puts a large down downpayment on the loan, for example, 50%. Because of the equity that is already in the home, there is no need to make any more payments for the life of the loan. taxes and insurance still need to be paid, of course. You will still accrue interest but because of the equity, it is not an issue with the lender. And the best thing is that you do not lose your equity! And because the loan is insured by FHA, it is very low risk.
If you have other questions about reverse mortgages, call us!