With a Reverse Mortgage, You No Longer Own Your Home
FALSE. You always maintain title, ownership and control of your home. The reverse mortgage lender simply has a first mortgage on the title.
You Will Owe More Than the Value of Your Home
FALSE. Most reverse mortgages come with a “No Negative Equity Guarantee” the notes as long as the homeowner has met the required obligations, the amount you will have to pay on the due date will not exceed the fair market value of your home.
Reverse Mortgages are Expensive
FALSE. Much like a conventional mortgage, an appraisal of your property and independent legal advice is required for a reverse mortgage and will be similar to the costs you would incur on a regular payment mortgage. However, beyond this the only additional fees are a one-off closing and administration fee. When compared to the cost of moving to another home, the reverse mortgage is a much more affordable option.
Reverse Mortgages Have Higher Interest Rates
DEPENDS. While interest rates are typically a bit higher than a traditional mortgage, the difference is not excessive. In addition, it is important to remember that monthly mortgage payments are not a viable option for most retired Canadians. In addition, there are many who struggle to even qualify for a traditional mortgage. For these reasons, many retired Canadians are choosing reverse mortgages over conventional solutions.
You Can’t Pass on Your Home
FALSE. Another myth is that your children won’t be able to inherit your home if you utilize a reverse mortgage. This is not the case as your heirs will always have the option of keeping the property by paying off your reverse mortgage after you pass away. Plus, if you have a “No Negative Equity Guarantee” in your reverse mortgage contract, then if the mortgage amount due is more than the gross proceeds from the sale of the property, the lender will cover the difference between the sale price and the loan amount. Therefore, you will never owe more than the fair market value of the home.
Published by DLC.