5 Reverse Mortgage Myths Los Angeles Homeowners Need to Stop Believing

If you are a Los Angeles homeowner aged 62 or older, you have likely heard conflicting information about reverse mortgages. Some people call them a scam. Others say you will lose your home. Very few actually understand how these loans work.

I am a licensed mortgage professional in California with NMLS # 2341564. My goal is to clear up the confusion. Here are 5 reverse mortgage myths that LA homeowners need to stop believing.

Myth 1: The bank will take your home.

This is the most common fear, and it is completely false. You keep the title to your home. The lender does not own your property. You remain the homeowner as long as you pay your property taxes, maintain homeowners insurance, and keep the home in good condition. The loan only becomes due when you permanently move out, sell the home, or pass away.

Myth 2: You cannot leave the home to your heirs.

Many seniors worry that a reverse mortgage will leave nothing for their children. That is not true. Your heirs can keep the home by repaying the loan, typically for 95% of the appraised value. Or, they can sell the home to repay the loan and keep any remaining equity. If the loan balance exceeds the home's value, FHA insurance covers the difference. Your heirs will never owe more than the home is worth.

Myth 3: Reverse mortgages are only for people who are broke.

This myth persists, but the data tells a different story. Many wealthy homeowners use reverse mortgages as a financial planning tool. The proceeds are tax free. You can set up a line of credit that grows over time. Some borrowers use reverse mortgages to delay taking Social Security benefits, allowing those benefits to grow larger. A reverse mortgage is not a last resort. It is a strategic option.

Myth 4: You will lose your Social Security or Medicare.

Reverse mortgage proceeds are loan advances, not income. The IRS does not treat them as taxable income. Therefore, they generally do not affect your Social Security or Medicare benefits. However, need-based programs like Medicaid or Supplemental Security Income (SSI) have different rules. Always consult a benefits specialist before making any decision.

Myth 5: The fees are too high to make it worth it.

Yes, reverse mortgages have higher upfront costs than traditional loans. But you must look at the full picture. You eliminate monthly mortgage payments. You access tax free cash. You have a non-recourse loan, meaning you will never owe more than your home's value. For many homeowners, the benefits far outweigh the costs.

Ready to learn more?

If you are a Los Angeles homeowner age 62 or older, contact LA Mortgage for a free consultation with a reverse mortgage specialist.

About the Author

Aaron Bae is a licensed California mortgage professional specializing in reverse mortgages and home purchase loans for Los Angeles homeowners. Visit LA Mortgage for more information.

With extensive research and study, Simon passionately creates blogs on divergent topics. His writings are unique and utterly grasping owing to his dedication in researching for distinctive topics.