Many of the myths surrounding CHIP Reverse Mortgages have often been as a result of information taken from American experiences. They have absolutely no relevance in Canada. Below, some of the myths that we often hear about, the ‘reliable’ information sources perpetrating these fallacies and what the real story is!
Myth Number 1: “The bank owns the home”
Fact: The homeowner always maintains title ownership and control of their home. They have the freedom to decide when and if they’d like to move or sell.
Myth Number 2: “Those with a reverse mortgage will owe more than their house is worth”.
Fact: HomEquity Bank’s conservative lending practices allow clients to take a maximum of 55% (33% on average) of the home’s appraised value. In fact, 99% of HomEquity Bank’s clients have equity remaining in the home when the loan is repaid.
Myth #3: “We will lose the house if we can’t make our payments”
Fact: There are no payments to make as long as at least one homeowner is living in the home. Many financial professionals recommend a reverse mortgage because it’s a great way to provide financial flexibility. Since it’s tax-free money, it allows retirement savings to last longer. And having this extra money may allow current investments to stay intact.
Myth #4: A Home Equity Line of Credit (HELOC) is a better option.
Fact: HELOCs are a good short-term borrowing option for people who can pay the interest and loan in the near future. However, HELOCs are callable loans and there exists significant risk of non-renewal or cancellation. In comparison, a reverse mortgage is a long-term financial solution that won’t be called based on economic changes. Changes such as interest rates increasing, property values decreasing, or a change in the homeowner’s income. Also, money from a reverse mortgage provides the ability to prolong retirement savings.
Myth #5: The bank can force the homeowner to sell or foreclose at any time.
Fact: A reverse mortgage is a lifetime product, and as long as property taxes and insurance are in good standing, the property remains in good condition, and the homeowner is living in the home, the loan won’t be called even if the house decreases in value. Reverse mortgages provide peace-of-mind that the homeowner can stay in their home as long as they’d like.
Myth #6: The homeowner cannot get a reverse mortgage if they have an existing mortgage.
Fact: Many of our clients use a reverse mortgage to pay off their existing mortgage and debts, freeing up cash flow for other things.
Myth #7: Surviving spouses are stuck paying the loan after the homeowner passes away.
Fact: Surviving spouses can choose to remain in the home without having to make a payment unless they choose to sell the home.