Fact: This is absolutely false! You retain full ownership and title to your home. Just like with any other mortgage, a lien is placed on the property to secure the loan. As long as you meet the loan guidelines—such as keeping the property maintained, paying property taxes, homeowners insurance, flood insurance, and HOA dues (if applicable), and not being away from home for more than six months—your home remains yours.

Myth: Your children won’t inherit any home equity.

Fact: While the amount of equity might decrease over time, it doesn’t mean there will be nothing left for your heirs. Factors like home appreciation, the length of the loan, and any optional payments you choose to make all play a role. There can definitely still be equity remaining for your children.

Myth: Your children are responsible for repaying the loan when you pass away.

Fact: This is a huge misconception. A reverse mortgage is a non-recourse loan. This means the lender can only be repaid from the sale of the home, and never for more than the home’s value. Even if your home’s value drops significantly, your heirs are not personally responsible for the debt. They will, however, have the option to refinance the loan to purchase the home themselves if they wish.

Myth: You have to make monthly mortgage payments.

Fact: This is false!One of the biggest advantages of a reverse mortgage is that monthly mortgage payments are not required. You do, however, remain responsible for maintaining your property and paying ongoing property charges like taxes, homeowners insurance, flood insurance, and HOA dues (if applicable).¹

Myth: You must have your first mortgage completely paid off to qualify.

Fact: While any existing debt on your home’s title must be paid off at closing, and you need to have sufficient equity, you don’t need to own your home “free and clear” before getting a reverse mortgage.

Myth: You’re not allowed to sell your home if you have a reverse mortgage.

Fact: You absolutely can sell your home whenever you choose. Just like with any other mortgage, the reverse mortgage is simply paid off at closing. There are also no prepayment penalties if you decide to pay off your loan early or make payments.

Important Facts About Reverse Mortgages (HECM Loans)

• Popular Choice: Many retirees use reverse mortgages to access their home’s value.

• Access Home Equity: This specialized loan allows homeowners, typically 62 and older, to convert a portion of their home equity into cash.

• Primary Residence Only: It’s only eligible for your primary or principal residence.

• FHA Insurance (HECM): Most reverse mortgages are Home Equity Conversion Mortgages (HECMs) and are insured by the Federal Housing Administration, offering protection for borrowers, lenders, and beneficiaries.

• Required Counseling: You’ll need to complete HUD counseling with an independent, HUD-approved third-party counselor before incurring any loan costs.

• Tax Implications: The cash you receive from a reverse mortgage is generally not subject to individual income taxation. However, always consult your tax advisor for personalized guidance.²

• Impact on Benefits: Reverse mortgage proceeds could affect government needs-based programs like Medicaid and Medi-Cal. If you receive such benefits, consult a professional before getting a reverse mortgage.

• Secured by Your Home: A reverse mortgage is secured by a lien on your home. And while there are no require mortgage payments, you will need to pay your property tax, home insurance, and HOA fees if applicable.

• Program Details Vary: While it’s a specialized loan, program rates, fees, terms, and conditions can vary by state and are subject to change.

Ready to learn more about how a reverse mortgage could benefit your specific situation? Contact The Friendly Lender today at 818-952-8666 or email david@thefriendlylender.com.