This changed in the early 90’s when legislation was introduce and passed giving FHA the ability to insure reverse mortgages. Most other non FHA reverse mortgage programs followed suit and changed their loan programs as well. With time, updates to the FHA insurance guidelines were passed allowing for larger loan sizes and further improvements to the loans themselves. Utah’s own Jim Matheson played a major role in some of those updates.

As a result, never at any point do you give up home ownership to the lender, on condition that you live in the home as your primary residence. This stipulation was designed to prevent borrowers from buying multiple properties with reverse mortgages to rent out, and to prevent abuse of the system. You can still go on extended vacations, go in for medical care for extended time frames as long as the home remains your principle residence.

Today’s reverse mortgages require a pay off if all borrowers pass away or move. Should you choose to move prior to passing away a payoff would be calculated based on the size of the original loan amount, plus any accrued interest on the loan. The interest accrual is added to the payoff because the lender does not collect regular payments on the loan thus needing to recapture the interest at the end of the loan. This is how reverse mortgage lenders make money.

               
With retention of home ownership, you may stay in your home as long as you like without ever being required to make a payment, and without any threat of being forced to move as long as you follow the loan terms. You may sell and move from your home at any time, and you keep all the equity in the home once the loan is paid off.

               
So what happens to your home when you pass away? See Myth #2- I won’t be able to pass the home on to my kids and heirs.