There are many misconceptions about reverse mortgages that can influence a person’s decision to apply for these loans. As such, it is important to debunk the most popular myths clouding reverse mortgages, according to a recent article from Bankrate.
Many people think that a reverse mortgage loan is part of a government benefit program, which can give potential borrowers a false sense of security because they assume it’s like Medicare or Social Security, the article explains.
“Reverse mortgage loans are not a government benefits,” the article says. “They’re private home loans, and lenders are businesses—not government entities or affiliates.”
Another misconception that people often believe is that you can’t lose your home to a foreclosure with a reverse mortgage. In reality, homeowners could face foreclose if they fall behind on paying their mandatory obligations, such as property taxes and homeowners insurance.
The knowledge around interest on reverse mortgages is also somewhat skewed among the general public. Some believe there is no interest on a reverse mortgage loan. This is often assumed since homeowners do not make monthly payments.
“With a reverse mortgage, instead of making monthly payments for 15 or 30 years and watching the balance drop, the balance keeps growing over the life of the loan, and comes due all at once—when the last remaining borrower or eligible non-borrowing spouse on the loan either dies or moves,” the article states.
Read more about reverse mortgage myths at Bankrate here.
Written by Alana Stramowski