Common Reverse Mortgage Myths Debunked

Reverse mortgages are often misunderstood. In an attempt to debunk common misunderstandings about reverse mortgages, we address them below.

Myth » If I take out a reverse mortgage the lender will own my home.
Fact: Homeowner still retains title and ownership to their home during the life of the loan, and can choose to sell the home at any time. The borrower must continue to live in the home as their primary residence, pay property taxes and insurance, and maintain the home in good condition.

Myth » There are restrictions on how reverse mortgage loan proceeds may be used.
Fact: There are no restrictions. The loan proceeds from the reverse mortgage can be used for virtually any purpose. Many homeowners have used reverse mortgages to consolidate debt, make home repairs, pay for medical needs, or to have a financial reserve.

Myth » I cannot get a reverse mortgage if I have an existing mortgage.
Fact: With enough equity in your home, you would pay off any existing mortgage so that your reverse mortgage is in first lien position. This is one of the most common reasons most homeowners take out a reverse mortgage.

Myth » Only low-income seniors get reverse mortgages.
Fact: Although some homeowners may have a greater need than others for the monthly proceeds or lump sum funds reverse mortgages offer, most simply prefer to be free of monthly principal and interest payments. Without monthly principal and interest payments, many homeowners find they can maintain their existing quality of life and build their savings to help with future expenses. A growing number of people who have no immediate need are taking out these loans as a financial planning tool.

Myth » If I outlive my life expectancy, the lender will evict me.
Fact: Reverse mortgage lenders put no time limit on how long seniors can stay in their homes. Homeowners still own the property, provided they follow the program guidelines such as continuing to live in the home as their primary residence, pay property taxes and insurance and maintain the home in good condition.

Myth » Reverse mortgage lenders pressure seniors to buy additional financial products.
Fact: This is not the case for all reverse mortgage lenders. However, Generation Mortgage Company only offers reverse mortgage products allowing this to be our main focus.

Myth » There are no objective advisors available to seniors trying to decide if a reverse mortgage suits their needs.
Fact: Borrowers are required to work with independent, third party counselors approved by the U.S. Department of Housing and Urban Development (HUD) in their local communities. This educational session helps them make the right decision for their unique situations.

Myth » My children will be responsible for the repayment of the loan.
Fact: If the borrower or their estate wants to retain the property, the balance must be paid in full. However, as long as the borrower or their estate sells the property to pay off the debt, there is no recourse if the HECM loan balance exceeds the home’s value at maturity. Any equity remaining in the property after the reverse mortgage is paid belongs to the borrower or their estate.

Myth » Reverse mortgage lenders take advantage of seniors.
Fact: As a consumer, you should only work with lenders that are Better Business Bureau and National Reverse Mortgage Lenders Association (NRMLA) members and adhere to those organizations’ strict Code of Ethics and Standards for Trust.