Myths and facts about reverse mortgages
Reverse mortgages get talked about a lot — and not always accurately. Here are the misconceptions I hear most often from clients, alongside what's actually true.
You hand over ownership of your home right away.
You keep title to your home as long as you meet the loan's requirements — maintaining the property, paying taxes, insurance, and HOA dues, and not being away for more than six months at a time.1 A lien is placed on the home to secure repayment, the same as with any other mortgage.
Your kids won't inherit any equity if you take out a reverse mortgage.
Equity often shrinks over the life of the loan, but that doesn't mean nothing is left. Home appreciation, how long the loan has been open, and whether you made optional payments all affect how much equity remains for your heirs.
Your children will be stuck paying off the loan when you pass away.
HECM loans are non-recourse — repayment comes only from the sale of the home, never more than it's worth. Heirs aren't personally on the hook, though they're welcome to refinance and keep the home if they'd like to.
A reverse mortgage requires monthly mortgage payments.
Monthly principal-and-interest payments are optional, not required. You'll still need to keep paying property taxes, insurance, HOA dues, and upkeep.1
You have to own your home free and clear before you can qualify.
Any existing mortgage balance is paid off using the reverse mortgage proceeds at closing. You just need enough equity in the home to cover it — not zero debt going in.
You can't sell your home once you have a reverse mortgage.
You can sell anytime you choose. Like any mortgage, the loan balance is paid off at closing, and there's no prepayment penalty if you pay it off early or sell sooner than expected.
A few more facts worth knowing
- Reverse mortgages are commonly used by retirees as one piece of a broader retirement income plan.
- They're available specifically to homeowners 62 and older.
- The loan only applies to your primary residence — not a vacation home or a rental property.
- FHA-insured HECM loans carry built-in protections for borrowers, lenders, and heirs alike.
- Independent, HUD-approved counseling is required before you incur any loan-related costs.
- Proceeds are generally not treated as taxable income, though you should confirm your specific situation with a tax advisor.2
- It's a loan, not a grant — it's repaid when the home is sold, the last borrower moves out or passes away, or the loan terms aren't met.2
- Reverse mortgage proceeds can affect need-based benefits like Medicaid; if you receive these, it's worth talking to a professional first.
- As with any mortgage, failing to meet the loan terms can ultimately lead to foreclosure.
- Rates, fees, and terms vary by state and change over time — I'll walk you through exactly what applies where you live.
Still have questions?
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1 Certain circumstances can still cause the loan to become due, including failure to pay property taxes or insurance, or failure to maintain the property to HUD standards. Credit is subject to age, income, credit history, and property qualifications. Rates, fees, terms, and conditions vary by state and are subject to change.
2 Borrowers should seek professional tax advice regarding reverse mortgage proceeds. This page is for general education and isn't a substitute for legal, tax, or financial advice.