There is an abundance of misinformation regarding Reverse Mortgages that needs to be cleared up. These are five myths & misconceptions that we commonly hear.
I will no longer own my home. False! A Reverse Mortgage is a legal contract that states specifically that you will NOT lose your home. The Reverse Mortgage is designed in a way that provides access for you to live in and maintain control of your home longer!
I will lose all the equity in my house. False! In Canada, the Reverse Mortgage was created very conservatively to ensure that you will NOT lose all your equity. This conservative nature is the reason you can only gain access to up to 55% of the equity. As well a 55-year-old will not have access to as high of a percentage as a 70-year-old thus preventing the equity from being completely run out.
If I die, my spouse will be forced to sell or pay off the mortgage. False! In this scenario, your spouse would continue living in the home for as long as they desired. No repayment is made until they leave the home and sell the property.
The interest rates are too high. False! Although the interest rates for Reverse Mortgages are slightly higher than a secured line of credit or conventional mortgage you need to realize that you are comparing apples and oranges. Lines of Credit and mortgages require regular payments where Reverse Mortgages do not. This benefit of receiving tax-free money without the requirement of payments is the reason you incur a higher interest rate.
I’ve heard rumors that they are “bad” or a “scam”. False! Although a bit vague the reality is that a Reverse Mortgage has some tremendous benefits for many. It appears though that most of the negative press appears to be coming from the United States where they have a similar product with completely different qualifying requirements. Our Canadian product’s conservative design prevents the very issues the American product creates.
If you would like to discuss these or any other misconceptions in greater detail, please do not hesitate to reach out.