A reverse mortgage lets a homeowner 62 or older borrow against the home’s equity and take the money as a lump sum, a line of credit, or monthly payments, with nothing repaid until all named borrowers sell, move out for good, or die.
Used well, a reverse mortgage can turn decades of built-up equity into retirement income. However, misinformation abounds, and it’s worth debunking a few myths and understanding the pitfalls before deciding whether a reverse mortgage is right for you.
If you are 62 or older, already considering a reverse mortgage, and you own the home you live in, Longbridge Financial is a top-rated reverse mortgage lender that offers a free quote showing exactly what you’d qualify for. A licensed specialist then explains the cost, how repayment works, and what it means for your heirs.
Straight answers, with no obligation. Get the facts in about two minutes.
Myth 1. A reverse mortgage hands your house to the bank
The most repeated belief about reverse mortgages is that the bank ends up owning your house. It does not. On a federally insured Home Equity Conversion Mortgage, or HECM, the title stays in your name.
A reverse mortgage is a loan against your equity, not a sale of your home, and your name stays on the deed for as long as you live there as your primary residence.
The lender holds no ownership stake. What changes is where the money goes. Instead of paying down a balance each month, you draw against equity you already own, and the loan is settled when you sell, move out for good, or die.
Myth 2. Your kids will inherit the debt
This is not true for a federally insured reverse mortgage, assuming the property is sold after you die. An HECM is non-recourse, so you or your heirs can never owe more than the home is worth when it is sold, even if the loan balance has grown past that value.
The catch is, if heirs want to keep the house, they must repay the loan with their own money or financing, satisfying it for the full balance or 95% of the appraised value, whichever is less. They get 30 days once the lender sends the due-and-payable notice, extendable up to six months.
Myth 3. It will shrink your Social Security and Medicare
Reverse mortgage proceeds will not reduce your Social Security retirement benefits or Medicare eligibility. The money is generally treated as loan proceeds rather than income, so neither is affected by how you spend it.
Needs-based programs are the exception. Supplemental Security Income (SSI) and Medicaid carry strict income and asset limits, and a lump sum left in your account past the month you receive it can count against you. Those rules vary by state and program, so anyone on SSI or Medicaid should check before drawing a large sum.
Myth 4. You cannot qualify unless the house is paid off
You can carry a mortgage balance and still qualify, provided it clears at closing from the reverse mortgage proceeds, your own funds, or both, according to the Consumer Financial Protection Bureau. After closing, you no longer have a monthly mortgage payment.
Among the requirements, you must be at least 62, live in the home as your primary residence, complete counseling approved by the Department of Housing and Urban Development (HUD), carry no delinquent federal debt, and show you can keep up with property taxes, insurance, and upkeep, or set money aside for them.
Myth 5. The lender can force you out whenever it likes
No lender can evict you on a whim. You keep the right to live in the home, but it comes with obligations. You must pay the property taxes and homeowners insurance, maintain the property, and keep it as your primary residence.
If you fall behind or move out permanently, the loan can be called due. That is in the fine print, and it is why counseling is mandatory before you sign.
Myth 6. Reverse mortgages are a scam aimed at the desperate
HECMs are federally regulated and carry borrower safeguards. The Federal Housing Administration insures an HECM, and, as noted above, every borrower must meet with an independent, HUD-approved counselor before closing.
With most reverse mortgages, you get three business days after closing to cancel without penalty, though not on an HECM used to buy a home. And no one can require you to buy an annuity or any other product as a condition of the loan. The real question is never whether the loan is legitimate. It is whether the costs fit your plan.
Know the facts before you act
As with any loan product, a reverse mortgage carries tradeoffs. Interest and fees are added to the balance every month, reducing the equity you leave to heirs.
If leaving an inheritance is not a priority, you are 62 or older, want to stay in your home, and have other income sources, a reverse mortgage lets you access the equity you’ve built over decades. It is your money to spend. Contact Longbridge Financial now.
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