Reverse mortgage myths – as reverse mortgages have grown in popularity, so have the misconceptions about these unique home equity loans. Make sure you know the truth!
Perhaps you have been considering a reverse home mortgage but are concerned about some of the dis-confirmingthings you have heard. Unfortunately, there are many misconceptions and just wrong information about this increasingly popular mortgage option.
Sure, it is a fact that there are some drawbacks to a reverse mortgage and it is important to investigate the reverse home mortgage alternatives beforedevising your final decision. However, in the correct scenario, a reverse mortgage is an awesome option of which to take advantage.
We feel that by discussing and dispelling some of the common reverse mortgage myths and misconceptions, you will have a better and more accurate understanding of what a reverse home mortgage really is and make an informed decision, based on the facts!
Reverse Mortgage Myth #1 – The Lender Will Own My Home
Fact: When you have a reverse home loan, you continue to own your home. Their is no change whatsoever in the ownership of the home. A reverse home mortgage is similar to a traditional mortgage loan in this regard – the mortgage is secured against your home, but the lender does not own it. The difference is that, instead of you making mortgage loan payments to the lender, the lender makes payments to you. Whenever you leave the home, the lender receives their money back (with interest) and any left over equity goes to you (or the estate).
Reverse Mortgage Myth #2 – I Could End Up Owing Money
Fact: In a reverse home loan you can never owe more than the value of your home. These mortgages are known as ‘non-recourse’ loans, which means that your loan amount will notexceed the value of your home. In the extremely rare event that your home value dropped majorly, the lender may , in fact, lose money – because they will only receive, as a maximum, your house value. As an aside, that is why they set up reverse home mortgage eligibility requirements.
Reverse Mortgage Myth #3 – My Heirs Will be Burdened
Fact: Once you, as the homeowner, pass away, your heirs will have the option of refinancing or selling the home without any obligation or penalty. If they want to keep the home in the family, they can simply refinance the home (take out a traditional mortgage to pay off the reverse mortgage). On the other hand, they can simply sell the home. With the proceeds of the sale, they can pay off whatever is owing on the reverse mortgage. Any leftover equity can be shared out. The only affect that a reverse equity loan will have on your heirs is that it will reduce the amount of equity in your home – thus reduce the amount of inheritance they receive.
In Summary…
Like many popular products, reverse home loan have their share of myths and misconceptions. While these myths about reverse mortgages are not based on fact, it is vital to remember that reverse equity loan are not for everyone. If you are considering a Canadian reverse mortgage we suggest you contact areverse mortgage specialist for further information and advice.