With a reverse mortgage, am I applying for both a loan and a line of credit?  Where does the possibility of any cash equity affect me? I had been told this would be a simple transfer of my home to the company, with no further mortgage payments from me for the rest of my life.  Upon my passing, the bank will own my home.  Am I too simple and naive in my understanding and explanation? I remain interested and confused. –Don C.

Who Owns My Home? – Reverse Mortgages Explained

Reverse mortgages are nothing but a loan against your home

Great question!  Reverse mortgages, such as the HUD Home Equity Conversion Mortgage (HECM), are a unique financial tool allowing homeowners to access home equity. Contrary to some misconceptions, the bank does not take ownership of your home.

Here’s how it works: Interest accrues on the unpaid balance of the loan.  The dynamics of a reverse mortgage are different from a traditional mortgage.  With a standard mortgage, you make monthly payments, gradually reducing your debt and increasing your equity.  In contrast, a reverse mortgage has a growing balance over time, either through periodic withdrawals or a lump sum draw, both accruing interest.

This is why it’s termed “reverse” – instead of paying down the debt, you’re essentially borrowing more over time, leading to increased debt and decreased equity.

However, an important aspect to note is that the ownership of the home always remains with you.  Any equity that exists in the property is yours or your heirs’.  The reverse mortgage enables you to live in your home for the rest of your life without the burden of monthly payments, although you remain responsible for property taxes, insurance, and maintenance.

A reverse mortgage can be a strategic way to manage your assets in retirement, but it’s important to understand this loan’s rising debt and falling equity nature.

Reverse mortgages have non-recourse protections 

The feature that protects borrowers is that this loan is a “non-recourse” loan.  In other words, if the property’s value is not adequate to repay the entire loan when you pass, your heirs can never be made to pay any additional money.

The only thing the lender or HUD can use to pay the loan back is the sale of the property, and therefore, they can never attach any of your other assets or ask your heirs to repay any shortfall.

However, if the property is worth more than the loan balance, your heirs can keep the home and pay off the loan balance, or they can sell the home and pay off the loan balance and keep the excess equity.  The bank does not automatically get the house.

When you pass, your heirs have a right to determine the property’s value and review the amount owed on the reverse mortgage.

The remaining equity belongs to you, NOT the bank.  

If there is still equity in the property, they notify the bank of their plans for paying the loan off (refinance the loan or sale of the property), and the bank will work with them to accomplish this goal.

If, however, they look at the balance and property values have gone down and there is no equity, heirs can choose to Deed the property back to the bank as the heirs are not required to do anything.  As stated previously, the bank has no other recourse for the loan repayment.

If you have no heirs, just like with any other loan, the bank would have to foreclose on the existing security documents, and then they would sell the home to repay the obligation.  But under all these options, the bank can never “just assume” ownership without legal due process of law.

Please make no mistake about it: a reverse mortgage is a loan.  However, it is a loan with safeguards built in to protect your heirs later after you pass while giving them the option of deciding whether or not it makes sense for them to keep the property, sell it themselves, and keep any equity left in the home, or give it back to the loan servicer in the case of no remaining equity.

Common Misconceptions about Reverse Mortgages

The bank owns the homeThe homeowner retains the title and ownership of the home
You can lose your home easilyAs long as you comply with the loan terms, such as paying property taxes and insurance, you can stay in your home
Reverse mortgages are only for desperate peopleThey are a strategic financial tool for many homeowners to access equity without selling their home
Heirs will inherit the debtHeirs will never owe more than the home is worth. They can choose to keep the home by paying off the reverse mortgage or sell it to cover the debt
Reverse mortgages are too expensiveWhile there are upfront costs, they are comparable to traditional mortgages and can be financed into the loan

Top FAQs


Do you keep the title of your home with a reverse mortgage?

Yes, you keep the title of your home with a reverse mortgage.  You remain the property owner like a traditional or “forward” mortgage.


What are your primary responsibilities with the loan?

Your primary responsibilities with a reverse mortgage loan are to live in the home as your primary residence, pay your property taxes, homeowners insurance, and HOA dues (if any), and maintain the upkeep of the property just like you would have to with a traditional mortgage. The only responsibility different with a reverse mortgage is requiring the home to remain your primary residence.


Can you lose your house with a reverse mortgage?

Like other mortgages, you can lose your house with a reverse mortgage.  While you have no mandatory mortgage payment obligation with a reverse mortgage, you can still end up in foreclosure if you fail to pay your property taxes and homeowners insurance or vacate the property permanently.


How many people lose their homes with a reverse mortgage?

How many people have lost their homes with a reverse mortgage is still being determined.  The only way for a borrower to default on a reverse mortgage is to fail to pay their property taxes or homeowners insurance or permanently vacate the property.  As the property owner, a reverse mortgage borrower can sell their home at any time to avoid foreclosure due to non-performance.

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