Let’s clear up some of those myths and misconceptions regarding reverse mortgages. Unfortunately, there are many false tales and stories about a reverse mortgage. Senior citizens and their heirs tend to think that using this program is a bad financial decision and to avoid it at all cost. Check out some of the myths and misconceptions below:
1.) The lender will take title on the home and own it. MYTH!
Fact: The borrower maintains ownership and title of the home. Lenders and banks are not in the business to own properties, they only want to earn interest on the loan they give you. If at any point you need to move you can sell the property anytime you would like. You still own it just as if you had any other loan on the home.
2.) My heirs will be stuck with the loan if I pass away. MYTH!
Fact: Your heirs will not have to pay anything to the lender if you pass away and you owe more than the property is worth. There are essentially two options you heirs have:
- They can pay off the loan or refinance it into a traditional mortgage and keep the house.
- Or they can sell the home and keep any proceeds above and beyond what is owed on the property. If the loan balance is greater than the value of the home, no extra money will have to be paid for the difference. Reverse mortgage loans are non-recourse, which means the lender cannot come after anyone for the balance difference.
3.) My home must be paid off before I can take out a reverse mortgage. MYTH!
Fact: Many borrowers still have a traditional loan on the home when they take out a reverse mortgage. The new loan will pay off the current loan, which will stop their mortgage payments and any additional money that is left over can be used at your discretion.
4.) Reverse mortgages just add debt, which I will be living on. MYTH!
Fact: A reverse mortgage allows you to use the equity in your home without having to make a mortgage payment and allowing you to live comfortably without worries. How else will you be able to enjoy the equity in your home, unless you sell your house or take out a traditional mortgage, which will just add another payment to your fixed income.
5.) The lender will take my home once all the equity in my home is gone. MYTH!
Fact: The lender cannot take the home under this circumstance, the only way the loan becomes due is if you sell the property, move away from the house for more than 6 months or you pass away.
To see more myths about Reverse Mortgages, click here.
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Myths and Misconceptions regarding Reverse Mortgages
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Reviewed by Merlyn Rosell
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Published :
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