HECM mortgage myths & facts

Myth: “The bank owns my home.”

Fact: You keep the title and ownership of your home. The lender holds a lien, just like with any mortgage.

Myth: “My heirs will owe more than the home is worth.”

Fact: A HECM is a non-recourse loan. When the loan becomes due, you or your heirs will never owe more than the home is worth when it's sold. Heirs can also keep the home by paying the loan balance or 95% of the appraised value, whichever is less.

Myth: “I have to own my home free and clear.”

Fact: You don't. Many people use a HECM mortgage to pay off an existing mortgage. You do need enough equity, and any existing mortgage is paid off at closing from the HECM proceeds or your own funds.

Myth: “I can be forced out of my home at any time.”

Fact: You can stay as long as you live in the home as your primary residence and meet the loan terms: pay property taxes, homeowners insurance and any HOA dues, and keep the home in good repair. Not meeting these obligations can cause the loan to become due.

Myth: “I'll never have to pay anything again.”

Fact: No monthly mortgage payment is required, and you can choose to make payments. But you must keep paying property taxes, insurance and HOA dues and maintain the home. Interest and fees are added to the balance over time.

Myth: “A HECM mortgage is only for people in financial trouble.”

Fact: Many homeowners use a HECM as a planning tool: to pay off a mortgage, create a line of credit for the future, cover home updates, or buy a home that fits retirement. It's a personal decision that's worth discussing with family and a financial advisor.

Myth: “It will reduce my Social Security or Medicare.”

Fact: HECM proceeds are loan funds, not income, and generally don't affect Social Security or Medicare. Need-based benefits such as Medicaid or SSI may be affected depending on how funds are used. Please check with a benefits professional and a tax advisor.

Myth: “I can't sell my home once I have a HECM.”

Fact: You can sell at any time. The loan is repaid from the sale, and any remaining equity belongs to you.

Myth: “If I pass away first, my spouse will have to move out.”

Fact: If your spouse is a co-borrower, they can stay. A spouse who isn't on the loan may be protected as an eligible non-borrowing spouse if certain requirements are met at closing and afterward, including living in the home. We'll go over this carefully before you apply.

Myth: “You can't use a HECM to buy a home.”

Fact: With a HECM for Purchase, homeowners 62+ can buy a new primary residence by combining a down payment with HECM proceeds, with no monthly mortgage payment required.

Myth: “A HECM line of credit stays the same forever.”

Fact: With a HECM line of credit, the unused portion can grow over time based on the loan's interest rate and mortgage insurance rate. Growth isn't a deposit or investment return, and it adds to what you could borrow, not to what you own.

Myth: “Counseling is just a sales pitch.”

Fact: HUD-approved counseling is required before applying for a HECM, and it's done by an independent counselor, not the lender. It's usually a phone session of about 30 minutes, and it's there to help you understand the loan and alternatives.