Reverse Mortgage Myths Debunked: The Top 10 Misconceptions

One of the most common patterns I notice with San Diego homeowners is that reverse mortgage myths usually disappear once families review actual loan obligations and payoff rules together.

Official program context: HUD.gov HECM. Consumer basics: CFPB reverse mortgage.

1) “The bank owns my home”

You retain title; the lender has a lien—like most mortgages.

2) “It’s free equity”

It is a loan with costs and a balance that typically grows—see reverse mortgage costs.

3) “Proceeds are taxable income”

Generally not when structured as loan proceeds—confirm with your CPA: are proceeds taxable.

4) “Social Security is always reduced”

Often misunderstood—read Social Security interaction.

5) “My heirs get nothing”

Heirs inherit subject to payoff; equity may remain—heirs and the home.

6) “There are no monthly payments, so there are no rules”

Taxes, insurance, maintenance, and occupancy still matter—ongoing obligations.

In my experience working with homeowners in San Diego and Carlsbad, the turning point is usually when adult children join the conversation and hear the rules directly. A Carlsbad client I worked with recently said the biggest relief was learning there was no hidden transfer of title, just standard lien mechanics and obligations. After 15 years of doing this in California and Arizona, I can tell you misinformation is still the biggest source of fear.

7) “It’s only for desperate people”

Many uses are proactive—portfolio coordination.

8) “All reverse mortgages are the same”

HECM and proprietary differ—HECM vs proprietary.

9) “I can’t ever refinance”

You may refinance in some cases—refinance a reverse mortgage.

10) “If balance exceeds value, heirs owe the gap”

HECM non-recourse matters—non-recourse feature.

According to CFPB guidance, heirs who want to keep the home can generally repay the lesser of the loan balance or 95% of the current appraised value on eligible FHA reverse mortgages.

Frequently asked questions

Where do myths come from?

Old products, bad actors, and one-size-fits-all media takes.

What is the fastest way to fact-check?

Read your disclosures and ask your loan officer to cite program sources.

Are popular radio hosts always wrong?

Often oversimplified—Dave Ramsey angle discussion.

Is a reverse mortgage a scam?

The product is not; fraud exists—avoid scams.

Next steps

Use the free reverse mortgage calculator and take the free readiness assessment. For myth-free numbers, use the contact page or about page.

This material is not from HUD or FHA and has not been approved by HUD or any government agency. All reverse mortgage loans are subject to credit and property approval.