According to legend, the first reverse mortgage was written by a banker in 1961 to help the widow of his high school football coach remain in her home. But it wasn’t until the late 1980s that Congress approved HUD regulations around them that they became part of the lending landscape. Today, almost 50,000 reverse mortgages are made every year. Despite their growing popularity, myths and misunderstanding persist.
Here are the top five reverse mortgage myths we hear all the time.
The bank will own my home if I get a reverse mortgage.
False: As with any mortgage, you retain full ownership of the home as long as you maintain your mortgage agreement.*
My heirs will not be able to inherit my home if I get a reverse mortgage.
False: You can still designate heirs in your end of life agreements. As with any property, heirs receive the property along with any equity or debt.
If one spouse passes, the other can lose the home.
False: FHA reverse mortgages (HECM) have safeguards in place to ensure the non-borrowing spouse can remain in a home as long as all loan agreements are otherwise maintained.
A reverse mortgage eliminates my mortgage payment so I’m no longer financially responsible for my home.
False: Even though you do not pay the bank monthly payments, you are still responsible for property taxes, homeowners insurance, Homeowners association fees (HOA) and other property maintenance costs. However, with a reverse mortgage, an account can be setup to help ensure the funds are available when you need them. †
Reverse mortgages are for people who have financial difficulties.
False: Reverse mortgages convert home equity—money you’ve invested or gained from your home—into funds that can be withdrawn, tax-free, as part of your overall retirement plan
This ad is not from HUD or FHA and was not approved by HUD or any government agency. The loan is subject to foreclosure for failure to pay taxes and insurance to maintain the property and insurance and to comply with the terms of the loan. Consumers remain responsible for property taxes, homeowner’s insurance, and home maintenance.