Myths · Facts
Reverse mortgage myths — and the facts that replace them.
The reverse mortgage industry of the 1990s genuinely earned some of these reputations. The product has changed substantially since FHA tightened HECM regulations. Here are six of the most common myths I hear, paired with the facts.
Six myths, six facts
For each myth, the fact is the entire reason FHA regulates HECM the way it does.
"You sign over ownership of your home."
FACT: You retain title to your home as long as you meet the loan guidelines and requirements. The lender places a lien — same as any mortgage — but you remain the owner.
"Children won't inherit any equity."
FACT: While equity typically decreases over time with a reverse mortgage, it doesn't mean none is left. In appreciating markets, equity often holds or grows even as the loan balance increases.
"Children are responsible for repaying the loan when I die."
FACT: A reverse mortgage is a non-recourse loan, meaning the lender can only be repaid from the proceeds of the home's sale. Your other assets — and your children's assets — are never on the hook.
"A reverse mortgage requires monthly mortgage payments."
FACT: You can choose to make payments, but they are not required. You remain responsible for property taxes, homeowner's insurance, and maintenance.
"My first mortgage must be paid off before I qualify."
FACT: Many homeowners think they must pay off their mortgage before they qualify. In reality, with a traditional FHA HECM reverse mortgage, your existing mortgage is usually paid off at closing. Some proprietary retirement mortgage programs may allow qualified borrowers to keep their current first mortgage.
"I can't sell my home once I have a reverse mortgage."
FACT: You can sell at any time. You pay off the reverse mortgage at closing, and the rest of the equity goes to you.
What myth has someone told you?
There are at least a dozen more circulating. Call me with whichever one is making you nervous — I'll tell you whether it's a myth or actually a fact you need to factor in.