Reverse Mortgage Myths

You may have heard or read about the potential downsides of reverse mortgage programs. Much of the information circulated online and by inexperienced mortgage loan officers is simply inaccurate. Below is a list of popular myths and a brief explanation as to the truth behind the following statements:

You must have excellent credit to qualify for a reverse mortgage.
Completely untrue. Reverse mortgage underwriting guidelines do not take into account a borrower's income or debt.

You can become upside down on your loan and end up owning more than your home is worth.
Borrowers and their heirs will not be required to ever pay back more than the value of the home.

The bank will become the owner of the property when they close.
Just as is the case with a traditional loan, the borrower retains ownership of the property and the mortgage is simply a lien against the property.

You must own your home outright in order to qualify for a reverse mortgage.
While owning your home free and clear may allow you to obtain the greater benefit, it is certainly possible to obtain a reverse mortgage if you have a current mortgage balance. The balance must be paid off with the proceeds from the reverse mortgage.

Reverse mortgages are extremely costly.
The vast majority of reverse mortgages are FHA HECMs, which are heavily regulated by HUD and the Federal Housing Administration. Closing costs are typically only about 1% higher than their traditional mortgage counterparts. Still, reverse mortgages are not for everyone and it is important to speak with a reverse mortgage professional to better understand the benefits and costs associated with reverse mortgages.

Please keep in mind that the reverse mortgage industry in constantly changing and some of the information contained on this site may not be current. Please ask a licensed reverse mortgage professional for up-to-date guidelines.