Common misconceptions of reverse mortgages:
The bank will take title to my home. At one time this may have been true, but not anymore. Now, the bank puts a lien on your home in return for the loan. This is like every other kind of mortgage. You retain title to the home so you can: live in it till you die, sell the house, will it to a family member or give it away if you like.
The bank can foreclose if I do a reverse mortgage. Watch our videos on mortgages and promissory notes. Like every other type of mortgage, there are terms and conditions. In the case of a reverse mortgage, you are required to live in the home as your primary residence, maintain the home, pay your real estate taxes, homeowner’s insurance, and any HOA dues if they apply. If you permanently move out of the home, the terms require you to settle the reverse mortgage as the loan will become due and payable.
If you sell your home, you or your heirs get all the equity after the mortgage and closing expenses are paid. If the house is worth less than what’s owed, you or your heirs can sell the house at market value. The bank is insured by the federal government through the mortgage insurance you paid at closing. That insurance then reimburses the bank for any shortages. This is called a NON-RECOURSE loan which means the bank won’t come after you or your heirs for any shortage when the home is sold.