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There’s a scripture that says in part, “My people perish for a lack of knowledge”. This phrase has been applied in countless ways and it can be said it applies to retirees who lack a basic understanding of how a reverse mortgage actually works or who’ve been misguided with myths and misconceptions.

A recent Mutual of Omaha survey reveals a severe knowledge gap about the basic features of a reverse mortgage among older Americans and retirees. Nearly three-quarters (74%) of respondents in a Mutual of Omaha survey report that they have little or no knowledge about reverse mortgages, with others revealing misconceptions about how exactly they work

“Access to cash is a critical part of a retirement plan, especially when retirees are faced with inflation, unexpected expenses and longer lifespans,” said Shelley Giordano, director of Enterprise Integration for Mutual of Omaha Mortgage. Mutual of Omaha surveyed 400 U.S. consumers over the age of 60 between the dates of April 13-25th. Those surveyed were asked to describe their current financial needs and then rate their knowledge of reverse mortgages. They were also asked what getting a reverse mortgage may mean to them and what needs it would meet. Here are some of the more notable takeaways from Mutual’s survey.

1- Two percent said they already have a reverse mortgage or plan to get one in the coming year.

2- 74% of respondents say they have lilt or no knowledge about reverse mortgages.

3- Of the remaining twenty-plus percent who say their somewhat knowledgeable 40% believe their heirs would not be able to inherit the home. What they don’t know is any remaining equity in the property after the death of the last borrower would be available to the heirs or the estate to do with as they see fit.

4- 22% believe that when you get a reverse mortgage you basically sign over the house to the bank or the lender. This is perhaps one of the most common and persistent reverse mortgage myths that has lived on for over 30 years which we shall address as the first of the four most common found in the survey responses.

The second myth is that the heirs are left with the financial burden or debt of a reverse mortgage. What’s overlooked and misunderstood is the HECM’s unique and nearly unparalleled ‘non-recourse’ provision. Heirs are in fact not obligated to repay the reverse mortgage unless they wish to purchase the home to assume ownership.

The third myth is perhaps more of a misunderstanding and it’s that the borrower has to leave the home before they’re finished using it. On it’s face that’s certainly a myth. However, if the borrower violates the terms of the loan such as not paying property taxes, insurance, or other required property charges they would likely have the loan called due and payable. Another possibility is if the last surviving borrower or non-borrowing spouse goes into long-term care and no longer occupies the property.

The fourth myth is a real head scratcher- monthly payments are required. Perhaps this myth can be attributed to the fact that reverse mortgages are counterintuitive to the general public who is conditioned that mortgages in general require monthly payments lest you get foreclosed upon.

One survey respondent says, “Based on what I’ve heard, my monthly mortgage payments would be paid by someone else, I would continue to be able to live in the home. They would own the home if I died; the home would no longer be mine,” this respondent said. What the survey reveals is this. Despite years of television ads and celebrity spokespersons, increased marketing and educational efforts, and publications from HUD and other agencies, a wide swath of the American public are generally uninformed or unaware of how a reverse mortgage works and what it could potentially do for them. The fields are ripe for education to dispel the myths and innuendo about one of the most unique and versatile mortgage loans in the United States.