You may see photos of young retirees on the golf course or enjoying recreational activities in reverse mortgage ads. A reverse mortgage is a special type of loan that allows homeowners age 62 and older to borrow against the accumulated equity in their home. The loan must be repaid when the borrower dies, moves, or no longer lives in the home.
Reverse mortgage ads can be found on television, radio, print, and online, and many ads feature celebrity endorsers discussing the benefits of reverse mortgages without mentioning the risks. We carefully reviewed many of the ads and found incomplete and incorrect statements used to describe the loans. Additionally, the most important loan requirements are often hidden in the fine print, even if they are mentioned at all. These ads may mislead older homeowners into thinking that reverse mortgages are a risk-free solution to their retirement financial gap.
While conducting our research, we spoke with homeowners in Washington, D.C., Chicago, and Los Angeles to get their thoughts and insights on reverse mortgage advertising. Many homeowners we spoke to didn’t realize that reverse mortgages had to be paid off, after seeing various ads. Instead, some have suggested they could get equity interest-free, or that the federal government would use the money for seniors. Homeowners told us that the most compelling messages in ads were “how long can you live in your home” and “you still own your home.” What many ads fail to mention, however, is that seniors could lose their homes if they don’t meet credit requirements, such as paying property taxes or home insurance.
To seniors, these ads make reverse mortgages seem like a great way to travel and enjoy retirement while they are young and active. Yet Americans are living longer, more active lives than ever before. Reverse mortgage borrowers can borrow more than their loan amount without careful planning.
Reverse mortgage ads don’t always tell the whole story, so consider the following facts when viewing ads:
A reverse mortgage is a home loan, not a government benefit.
Like other mortgages, reverse mortgages have fees and additional interest. With most reverse mortgages, federal insurance guarantees the borrower will get the loan if they experience financial hardship or if the loan balance exceeds the value of the home. However, the borrower pays for this insurance, which is not a government benefit.
You could lose your home to a reverse mortgage.
When reverse mortgage ads say you can retain ownership of the home or live there as long as you want, don’t take the information at face value. These statements are true only if you continue to meet all requirements for a reverse mortgage. You could lose your loan if you default on property taxes or homeowner’s insurance, stay in the home for more than six months, or fail to meet other requirements. If you don’t take care of the default promptly, the lender may foreclose on your home. Sometimes these requirements are spelled out in the fine print, but not always. If you have questions about reverse mortgage loan requirements, please contact your nearest HUD-approved housing counseling agency.
Without a good plan, you could spend your loan money
After seeing reverse mortgage ads, you might think that a reverse mortgage can keep you financially secure, no matter how old you are. Americans today are living longer than previous generations. Make sure you have a financial plan for longevity. That way, if you need to tap into your home equity, you won’t do so too early and risk losing your retirement resources later in life.
If you have problems with your personal loan
Ask the CFPB for more information about reverse mortgages. You can also download a print-friendly version of this information to share with friends or clients.
If you have a problem with your reverse mortgage or are having difficulty getting your mortgage serviced, please report your complaint online or contact us at (855) 411-2372 or TTY/TDD (855) 729-2372. We will forward your complaint to the company and strive to receive a response within 15 days.
For more information about how reverse mortgages work and what questions to ask, read our guide to reverse mortgages for older consumers and their families.
