Reverse mortgage myths – as reverse home loans have increased in popularity, so have the misconceptions about these unique mortgage loans. Ensure you know the truth!

Perhaps you have been considering a reverse home mortgage loan but are uncertain about some of the negativethings you have heard. Unfortunately, there are many misconceptions and just wrong information about this increasingly popular loan option.

Sure, it is true that there are some drawbacks to a reverse mortgage and it is important to investigate the reverse home loan alternatives beforedevising your final conclusion. However, in the right circumstance, a reverse mortgage is an awesome option to have.

We feel that by addressing and clearing up some of the common reverse mortgage myths and misconceptions, you will have a better and more exact understanding of what a reverse home loan 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 mortgage loan, you continue to own your home. Their is no change whatsoever in the ownership of the home. A reverse mortgage loan is similar to a traditional mortgage 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 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 loans are known as ‘non-recourse’ loans, which means that your loan amount will notexceed the value of your home. In the unlikely event that your home value fell substantially, the lender may actually lose money – because they will only receive, as a maximum, your house value. As an aside, that is why they set up reverse mortgage loan eligibility requirements.

Reverse Mortgage Myth #3 – My Heirs Will be Burdened

Fact: Once you, as the homeowner, pass away, your heirs will have the opportunity to refinancing or selling the home without any obligation or penalty. If they want to keep the home in the family, they can easily refinance the home (take out a traditional mortgage to pay off the reverse equity loan). On the other hand, they can also 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 divided up. The only affect that a reverse home mortgage will have on your heirs is that it will reduce the amount of equity in your home – thus reduce the amount of inheritance they get.

In Summary…

Like many popular products, reverse equity loan have their share of myths and misconceptions. While these myths about reverse mortgages are not based on the truth, 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 a reverse mortgage specialist for further information and advice.