Myth 1: You Lose Ownership of Your Home
One of the most prevalent myths about reverse mortgages is that you lose ownership of your home. This is far from the truth. When you take out a reverse mortgage, you retain ownership of your home, just as you would with a traditional mortgage. The lender simply has a lien on the property, and you continue to live there as long as you meet the loan requirements, which typically involve living in the home as your primary residence.
Myth 2: Reverse Mortgages Are a Scam
Another common misconception is that reverse mortgages are scams designed to take advantage of seniors. While there have been cases of unscrupulous individuals and companies in the past, reverse mortgages themselves are not scams. They are a legitimate financial product regulated by the government, and many seniors have successfully used them to improve their financial well-being.
Myth 3: You Can Owe More Than Your Home's Value
Some people believe that with a reverse mortgage, you can end up owing more than your home's value. This is only partially true. Reverse mortgages are designed to ensure that you can never owe more than the home's appraised value when the loan comes due. The Home Equity Conversion Mortgage (HECM), the most common type of reverse mortgage, is insured by the Federal Housing Administration (FHA), which guarantees this protection.
Myth 4: You Must Repay the Loan While Living in the Home
Contrary to another misconception, you don't need to make monthly payments on a reverse mortgage while you're living in your home. The loan is typically repaid when you sell the home, move out, or pass away. However, you must still meet certain requirements, such as paying property taxes, homeowners insurance, and maintaining the home's condition.
Myth 5: You Can't Leave an Inheritance
Many people believe that taking out a reverse mortgage means leaving nothing for your heirs. While the home may be sold to repay the loan, any remaining equity after the loan is repaid goes to you or your heirs. This means that you can still leave an inheritance to your loved ones, albeit potentially less than if you didn't have a reverse mortgage.