Before we know what Dave Ramset says about a reverse mortgage, it’s crucial to know who Dave Ramsey is.
David Lawrence Ramsey III is a personal finance expert, radio show host, author, and businessperson from the United States. Dave Ramsey is a financial guru who helps and influences millions of people. His fan base continues to increase due to the numerous videos and materials available on the internet.
Dave has stated his opposition to the HECM Reverse Mortgage. But, unfortunately, he misrepresents the HECM Reverse Mortgage in a big way. He gives misleading ideas, explanations, and facts about how reverse mortgages work, for example.
Many of Dave Ramsey’s followers blindly take his beliefs as fact because of the positive things he has done. As a result, they pass on an opportunity that may significantly enhance their lives.
What Is a Reverse Mortgage?
Before getting into our main topic of “what does Dave Ramsey say about reverse mortgages?” We will look into the definition of a reverse mortgage. Moreover, when you have a standard mortgage, you make monthly payments to the lender to purchase your property over time. A reverse mortgage is one where the lender pays you back.
The amount owed to the lender by a homeowner with a reverse mortgage loan increases with time, not decreases. Because interest and fees are applied to the loan total each month, this is the case. As a result, your home equity drops as your loan balance rises.
The Misunderstanding of Reverse Mortgages by Dave Ramsey
Dave Ramsey made a scathing video regarding reverse mortgages on YouTube approximately a year ago. He couldn’t understand why a 92-year-old woman in need of a little extra cash would take out a reverse mortgage in his introductory monologue.
Dave persuaded her to take out a 15-year loan. He omitted to mention that a 15-year mortgage has a higher monthly payment than a 30-year mortgage for others who aren’t as financially wise as he is. Only a tiny percentage of seniors on a fixed income will be able to afford it.
The fact that someone with such a large following would say something like that is reckless, dangerous, and deserving of a well-informed response.
Dave Ramsey’s Erroneous Explanations
Some of the impressions Dave’s videos convey are as follows:
● Reverse mortgages are not a good idea.
● If you have a Reverse Mortgage, you stand a good chance of losing your home to the bank.
● You wouldn’t lose your home if you didn’t have a Reverse Mortgage because you didn’t pay your property taxes.
● Interest rates are abnormally high compared to standard mortgage rates in a reverse mortgage.
Myths Regarding Reverse Mortgages by Dave Ramsey
These are some of the myths he debunks in his article “How Reverse Mortgages Work.”
Dave Ramsey is a firm believer in reverse mortgages. But, in all cases, he advises against them.
“You could lose your home” during the period of the reverse house mortgage. These words are clearly present in his article. However, this statement is highly deceptive because having a reverse mortgage does not mean losing your home.
“You’ll probably owe more than your home is worth,” Dave says. Of course, this statement is a half-truth meant to scare you away from learning the truth.
Is Reverse Mortgage suitable for you?
A reverse Mortgage is sometimes not the best option for most people. Remember that a Reverse Mortgage is essentially a product that allows you to tap into the equity in your property. Fortunately, other goods provide similar benefits at lower and more clearly stated costs.
To keep it precise about what Dave Ramsey says about reverse mortgages. Well, reverse mortgages can be effective at debt reduction. Imagine paying off tens or hundreds of thousands of dollars in debt using reverse mortgage earnings that allow homeowners to pay off the new loan total much more quickly, with interest rates in the 2% to 4% range.