Over time, many people have developed misconceptions about reverse mortgages based on inaccurate media coverage. The truth is reverse mortgages have never been safer and they’re a viable retirement option when they are understood. Here are several common misconceptions about reverse mortgages as well as the truths behind them.
Misconception: The bank (or government) owns your home.
Truth: The borrower owns the home through the duration of the loan, just like any other mortgage loan.
Misconception: You can outlive your home equity.
Truth: Under the terms of a government-insured Home Equity Conversion Mortgage, you cannot “outlive” your home. You have the right to remain in the home regardless of its value over time, as long as you adhere to the terms of the loan – in particular borrowers need to make sure they have sufficient funds to pay property taxes and hazard insurance.
Misconception: Your kids will lose their inheritance.
Truth: At the point when you move from the home or pass away, your heirs will inherit the home as well as responsibility for repaying the loan. If they choose to keep the home, they must pay or finance the entire loan amount. If they choose not keep the home, their maximum obligation is the selling price of the home. If there is any remaining equity in excess of the amount due, the heirs will inherit that difference.
Misconception: Reverse mortgages are expensive.
Truth: A reverse mortgage comes with insurance costs as well as origination and upfront fees. If you are considering a reverse mortgage, you should compare the costs of a reverse mortgage to the transaction costs of your other alternatives such as selling your home and downsizing, or moving into a retirement community or home.
