Common misconceptions about reverse mortgages include the following beliefs:
- Misconception 1: The lender takes ownership of the home. In reality, the lender will put a lien on the property, but the borrower retains the title and ownership throughout the duration of the reverse mortgage so long as they comply with the terms of the loan.
- Misconception 2: Reverse mortgages can easily lead to foreclosure. As long as the borrower meets the loan’s requirements, such as paying property taxes and maintaining insurance, the home remains theirs. If the borrower fails to comply with the loan terms, the lender can foreclose on the property.
- Misconception 3: Reverse mortgages are only for desperate homeowners in financial distress. In reality, reverse mortgage borrowers must demonstrate a certain level of solvency before they are granted the loan. Contrary to popular perception, many financially savvy individuals have used reverse mortgages as a strategic part of their retirement planning.
- Misconception 4: Reverse mortgages are prohibitively expensive. While they do have unique costs, when managed properly, reverse mortgage expenses are comparable to those for other types of home loans.