Reverse mortgages: Is it true? Can you really keep your house?



Senior Attorney; Manager, Financial Services Program


We support reforms to the financial marketplace that protect consumers from unscrupulous banks and lenders.

By Norma Garcia on Wednesday, June 18th, 2014

If you’re wondering about the answer to this question, check out this NBC Bay Area news story which aired on June 11th.  Reality Check: Reverse Mortgages Aren’t As Good As They Sound  After you’ve watched, tell us what you think in the comments section below.

Over the years, Consumers Union has written about reverse mortgages and the some of the unexpected Gotchas that can confuse seniors who are considering getting one of these loans.  And it seems that certain themes keep repeating themselves when borrowers or their children share their stories with us about what went wrong with a reverse mortgage– falling for sales pitches from trusted celebrities and not fully understanding the product or the impact on family members, to name a few.

Here are five things you can do to protect yourself or a loved one if a reverse mortgage is something you are considering:

  1. If you need cash, consider alternatives to reverse mortgages first.
  2. Explore eligibility for less expensive programs or benefits.
  3. See if family financing is an option.
  4. Calculate the continuing expenses that come with a reverse mortgage.
  5. See a HUD Counselor face-to-face and consult with your financial advisors and an elder law attorney.

For more details, see Consumers Union’s Tips for Seniors Considering a Reverse Mortgage.

8 responses to “Reverse mortgages: Is it true? Can you really keep your house?”

  1. Paul H. Prehn says:

    Unfortunately, only the top 2% of the people living in the U. S. have significant assets. This is true because of a variety of reasons, not the least of which is that the majority of the people in the U.S. are somewhere between stupid and unaware of financial concepts in general. The above comments that are negative on reverse mortgages are clearly an example of people who either don’t get the full story, or are not smart enough to understand it. If you are over age 62 and your spouse is as well, and you execute a reverse mortgage, the mortgage is guaranteed to age 150, which pretty much guarantees it will be in place for your entire lifetime. Yes, the fees on a reverse mortgage are higher than most conventional mortgages because the loan is a non-recourse loan. This guarantees that when the homeowners die or sell the home, there is no recourse to their heirs if there is a shortfall. You pay insurance for a non recourse loan. With a reverse mortgage you can stay in the home as long as you live if you pay the real estate taxes and insurance, and maintain the home. This is because HUD has made your loan against the property and they want to make sure that it is maintained in reasonably good condition. Therefore, if the home were to burn down for example, you have insurance to replace it and the taxes are paid. Obviously anyone knows that if you don’t pay your real estate taxes you could ultimately lose the property, with or without a reverse mortgage. A reverse mortgage allows you to access the equity in your home or eliminate current mortgage payments for the rest of your life. When you and/or your spouse die, the home is sold, and if there is still equity in it, it is distributed to your heirs. If there is a shortfall, the insurance you paid guarantees there is no recourse to your heirs. In my opinion, if you can qualify for a reverse mortgage, whether you have an existing mortgage or not, to not avail yourself of it would be analogous to turning down your social security benefit assuming you qualify for it. Using the catch phrase “if it is too good to be true, it’s not true”, is a overused and tired phrase. Many people are using the phrase because they think it is clever. The truth is, as an entrepreneur over many decades, something that appears to be too good to be true, turns out to be true in many cases. You just have to have enough wisdom to know the difference. If you disagree with my interpretation of the reverse mortgage, feel free to contact me at By the way, HUD requires that in order to get a reverse mortgage, a 30-45 minute interview is required of all applicants. This interview answers all of the above questions and concerns. Any further discussion or legislation regarding reverse mortgages is a waste of time and taxpayer’s money.

  2. Fran says:

    Like Karl, we have no one we wish to leave the house to.
    We met with an independent senior counselor before making our decision.
    We used a local broker (who had better rates than the big boys).
    We only took out what we needed at the moment, leaving most of the equity untouched (except, of course, for the interest accumulation).
    According to our contract:
    As long as either one of us lives in the house, & we keep up with taxes, insurance & maintenance, the lender may not call in the loan.
    If we sell, the lender gets his loan plus interest off the top.
    If we sell & buy a smaller place, we have the right to roll over the reverse mortgage to the new place.
    We may repay any or all of the loan & or interest at any time with no penalty.
    If neither of us lives in the home (due to death &/or incapacity), we or our estate has a minumum of 6 months, & a maximum of 18, to put the house on the market (not to get it sold, just to put it up for sale).
    Finally, a dear older friend of ours used the same broker, with independent counselling, to max. her loan & invest it at a similar interst rate so she could access the money quickly. She, too, had no one she wished to leave the house to & went to her grave with great peace of mind.

  3. Felipe says:

    Almost all of my colleagues and associates who have knowledge (mostly from their relatives, etc.) have shared horror stories with me that would cause any reasonable individual’s eyebrows to rise from incredulity. The irony is the unbelievable dishonesty that continues to pervade the real estate industry in general and the arrogant avarice that drives the thieving so-and-so’s who prey on others.

  4. Jim says:

    Reviewed the video on the reverse mortgage loans and was surprised that it was not such a good idea, especially after all the hype on TV/radio etc., especially by leading persons.
    Talked to my bank manager about the programs serious shortfalls and she agreed. However, she added the some people were so desperate that they had no other option. Would advise anyone considering reverse mortgage to talk to a counselor that did not have an financial interest in promoting the mortgage.

  5. Karl Baldwin says:

    In my case, my reverse mortgage is a Godsend. I planned it for over a decade prior to being elligible at 62. I eliminated large (for me) monthly mortgage payments. I only pay real estate tax, insurance and minimal upkeep costs. I have no spouse; my brother and sister are NOT in my will and I intend to live in my home until I die. When that eventuality occurs, I don’t care who gets the house – the state I suppose. The mortgage company requires annual verification that the insurance and taxes are paid. My home insurance company provides that verification, and I email copies of my tax payment receipts. Pretty simple and painless for someone like me and in my circumstances.

    So for me, it’s not too good to be true – it is good. Other’s millage may vary, so as always, be dilligent, as the article’s admonishments suggest. Cheers.

    • Roger Christopher says:

      ” I intend to live in my home until I die. When that eventuality occurs, I don’t care who gets the house – the state I suppose. ”

      Karl, I do not believe the state will get your house when you die. The company that you entered into a contract for a reverse mortgage will get your house. That is what they are counting on so that they can sell it at a profit.

      What do you think will happen to your house if, due to unforeseen circumstances, you can no longer stay in your house because you have to go to a nursing home? I say that the deal is off and they will sell your home to make their profit.

  6. Jerry says:

    What they don’t tell you is that they can call the loan at any time.
    They should be required to give disclaimer info such as in medicine ads.

  7. Bcherr says:

    Anything that sounds to good to be true probably is and furthermore the people who do the ads must be getting paid very well and the TV ads are expensive.

    It sounds like a good idea but to good to be true.

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