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Reverse Mortgage Scams and Warning Signs to Know

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How a reverse mortgage (HECM) actually works

A Home Equity Conversion Mortgage, or HECM, is the reverse mortgage insured by the Federal Housing Administration (FHA). To qualify, you must be 62 or older, the home must be your primary residence, and it must be owned outright or the existing mortgage paid off using the HECM proceeds. You keep the title, but you must keep paying property taxes, homeowners insurance (and flood insurance if required), and keep the home maintained. Falling behind on any of that counts as a default and can lead to foreclosure — the loan does not erase that duty.

Free counseling from a HUD-approved agency is required by law before you can apply. Call 1-800-569-4287 or see HUD — HECM counseling. There are also proprietary, or "jumbo," reverse mortgages for higher-value homes that are not FHA-insured — the protections are different. Ask the counselor about that too.

For the full rules, see HUD — Home Equity Conversion Mortgages for seniors. This is general information, not financial or legal advice — confirm your own situation with the counselor and with the lender's official disclosures.

What it costs — up front and over time

Nobody can tell you the exact dollar amount you would get without knowing the youngest borrower's age, the home's appraised value up to the FHA limit, and current interest rates. What is known is the shape of the costs:

• An up-front FHA mortgage insurance premium — 2% of the home's value, up to the FHA limit.
• An annual mortgage insurance premium — 0.5% of the loan balance.
• An origination fee (capped), plus closing costs and ongoing servicing fees.

Because interest and mortgage insurance accrue on the balance instead of being paid monthly, the balance grows and your equity in the home shrinks over time. The lender must give you a TALC disclosure — the total annual loan cost — showing the real numbers for your situation. See CFPB — Reverse mortgages for the full breakdown and the questions to ask before you sign anything.

What happens when you move, sell, or pass away

The loan becomes due when the last borrower on the loan dies, sells the home, or lives somewhere else for 12 months. At that point:

• Heirs generally have 6 months (which can be extended) to repay the balance, sell the home, or buy it for 95% of its appraised value.
• A HECM is non-recourse: the borrower or the estate never owes more than the home is worth when it is sold — heirs are not personally on the hook for the difference.
• An eligible spouse who is not listed as a borrower may be able to stay in the home under current HUD rules if requirements are met — ask the counselor specifically about this before signing, since it affects whether a younger spouse should be left off the title.

See CFPB — Reverse mortgage: after the borrower for more detail. This is not estate-planning advice — an elder-law attorney should look at your specific family situation.

Sales pitches that are red flags

Regulators point to specific tactics that should make you stop and ask questions before you sign anything:

• Pressure to put the loan proceeds into an annuity, an insurance product, or an investment.
• A contractor or salesperson who suggests a reverse mortgage to pay for their own work.
• A promise that "you'll never lose your home" without mentioning that missing taxes or insurance can still lead to foreclosure.
• Advice to leave a younger spouse off the title so you "qualify for more money."
• Any up-front fee demanded by a third party.
• Anyone who discourages you from completing the required HUD counseling session.

See FTC — Reverse mortgages for the full list. If you see any of these, stop, hang up, and bring it to your HUD counselor or an elder-law attorney before you sign anything.

Alternatives worth checking first

A reverse mortgage is one option, not the only one. Depending on the need, it's worth checking these first:

• Florida lets eligible seniors defer property taxes on their homestead — see Fla. Stat. 197.252 — plus additional senior homestead exemptions (ask your county property appraiser).
• Grants for home repairs, such as My Safe Florida Home and similar programs, if the need is a specific fix rather than ongoing income.
• A home-equity loan or line of credit, if your income can support the monthly payments.
• Selling and downsizing to a smaller or less expensive home.
• Medicaid, Extra Help, and other benefit checks that may cover costs without touching the home.
• Family arrangements — but only worked out with an elder-law attorney involved.

None of this is a recommendation for your situation — confirm eligibility and details with the agency or professional involved.

What to do next

The free tool reads your own situation — the ages on the title, roughly what the home is worth, what's still owed, and what the money is for — and gives you the plain-language picture: how the loan would work, what it would cost, what your heirs would face, and which alternatives fit, before you call anyone. Nothing you type is stored. It is not financial, legal, or tax advice, and it never tells you a dollar amount — bring what it shows you to the free HUD counselor (1-800-569-4287) and, if there are heirs or a spouse involved, to an elder-law attorney before you sign anything.

Reverse Mortgage Check explains HECM rules, costs and alternatives in plain language from HUD, CFPB and FTC sources; it can be wrong, and it is not financial, legal or tax advice. Terms change — the HUD counselor and the lender's disclosures control. Nothing you type is stored.