5 Myths About Reverse Mortgages

A Popular Option for Seniors Age 62 and Older

Reverse mortgages, also known as home equity conversion mortgages, are becoming a popular option for seniors age 62 and older who are dealing with shrinking retirement accounts and higher health care costs. Here are some commonly held misconceptions about these FHA-insured loans:

Myth #1: I’ll lose some of my Social Security benefits due to the extra income.
Because the money you receive from your reverse mortgage is not considered income, you are not taxed on the proceeds. Your Social Security and Medicaid benefits remain the same as long as the money you receive from the loan is used within the same month you receive it. You can choose to take out the equity in your home as a lump sum, opt for recurring monthly payments, or use it as a line of credit that can be accessed in emergencies or as needed. Additionally, because the loan is secured by the equity in your home, you don’t need to meet the income and credit qualifications that are required in traditional mortgages.

Myth #2: If I am unable to repay the loan, I’ll lose my home.
Unlike many deferred payment loans that allow a defined grace period before payments become due, a reverse mortgage has no established time limit that triggers repayment of the loan. As long as your home is your principal residence, you are not required to make any repayments toward the loan, though you are still responsible to continue making payments on your property taxes and insurance. You also retain the title to your property as long as you are living there.

Myth #3: I will only qualify if I own my house outright.
While you do need to have a significant equity stake in your home to qualify for a reverse mortgage, you do not have to own it outright. If your home is still being financed through a traditional mortgage, you will need to use part of the proceeds from your reverse mortgage to pay off your remaining balance. In fact, many seniors who choose this type of financing do so to eliminate their monthly mortgage payment.


Myth #4: I won’t be able to pass my home to my family through my estate.
 In the event of your death, your heirs will still be able to make the final decision on the disposition of your home. If they choose to sell it, the remaining equity in your home after the reverse mortgage is repaid will go to your estate. If they would prefer to keep the home instead, they can refinance the home with a traditional mortgage and pay off the balance due on the loan.

Myth #5: I could end up owing more than what my house is worth.
The reverse mortgage loan amount that you qualify for depends on a variety of factors including your age, the amount of equity present in your home and the current interest rates. After considering these factors, the loan is structured with the intent to keep you from owing more than the current value of your home. If, at the time of sale, your house is worth less than your loan balance, the FHA will cover the difference.

Want more help?
Numerica has partnered with Security Reverse Mortgage to educate our members on all aspects of reverse mortgages. To find out if you are in the right position for this type of loan, call us at (800) 455-4265.