How To Recognize Reverse Mortgage Scams

Gina LaGuardia has more than 25 years of experience in senior editorial roles, and is an expert in personal finance topics, including banking and lending. She has created content for financial powerhouses such as Chase Bank, American Express Canada, First Horizon Bank, BBVA, and SoFi.

A reverse mortgage is a special loan designed to give older homeowners a way to turn their home equity into cash without requiring monthly payments, while still allowing them to live in their home.

Due to its complexity and target audience, however, the reverse mortgage market is a popular target for scammers looking to take people’s homes. These scams often involve high-pressure sales tactics or highly advertised deals that expire very quickly.

Knowing what scams to watch out for—and how to avoid them—can help you make sure you’re getting a legitimate reverse mortgage.

Key Takeaways

• Reverse mortgages let homeowners get cash out of their home equity while still living in it without having to make monthly payments. The loan is usually repaid when the borrower sells the home or no longer lives there.
• Reverse mortgage scams are often hard to spot, but may involve cold calls, high-pressure tactics, or “can’t miss” opportunities.
• Always consult with a lawyer and read through the entirety of any document before you sign it.

Common Reverse Mortgage Scams

There are a few common types of reverse mortgage scams. Some of the most common are perpetrated by family members or close friends. These people, acting in a position of trust, either try to convince an elderly homeowner to sign up for a reverse mortgage or use the homeowner’s identity to apply for the loan without permission.

Scammers may also pose as salespeople or even financial experts. If someone tells you about a fantastic investment opportunity that’s disappearing quickly, and encourages you to take advantage by applying for a reverse mortgage, you should be wary.

Some scammers will even try to get you to sign over power of attorney or sign away the proceeds of the loan while filling out paperwork. Mortgages involve a lot of documents, so it can be easy to miss when you’re busy signing things.

For homeowners in financial trouble, a scammer might advertise a reverse mortgage as a way to stop foreclosure, charging a fee to help the homeowner apply for the loan. In this case, they’ll take the fee and disappear, leaving the homeowner with even fewer resources to use to pay their debts.

How To Avoid Reverse Mortgage Scams

Avoiding reverse mortgage scams involves some vigilance, but following these tips can help.

Ignore Cold Calls

If you’re looking for a reverse mortgage, you can look into local lenders and groups that offer these loans. If someone calls you unsolicited to advertise a reverse mortgage, especially if you haven’t been in the market for one, there’s a good chance they’re a scammer.

Be Aware of High-Pressure Sales

Scammers want to close the deal and move on to their next mark as quickly as possible. They’ll often use high-pressure tactics, such as telling you that a deal is only available if you sign the paperwork “right now.”

If you’re feeling pressured by a salesperson or someone who is encouraging you to get a reverse mortgage, walk away from the interaction. They don’t have your best interests in mind.

Work With a Professional

Reverse mortgages are complex, even more so than traditional mortgages. It can be hard to understand exactly how they work and the precise terms outlined in your loan contract. Have a trusted attorney review any documents you’re asked to sign before you sign them, and be sure to speak with a tax professional to determine your individual tax consequences.

What To Do if You’ve Been Scammed

Even if you remain vigilant, there’s still a chance you could fall prey to a reverse mortgage scam. If you think you’ve been scammed, report it to the Federal Trade Commission, state attorney general, or your state's banking regulatory agency. These groups can help investigate fraudulent activity.

To help with the investigation, it’s a good idea to preserve any records of conversations you had with the scammer as well as any documents you signed.

Finding the Best Reverse Mortgage

If you’re in the market for a reverse mortgage, take a few minutes to think about whether it’s the right type of loan for you. Reverse mortgages are typically best for older homeowners who plan to stay in their homes for the long term and who don’t expect to leave the property to their heirs. If you’re moving soon or hope to pass on the property, a reverse mortgage might not be the best choice. Instead, consider a home equity loan or line of credit.

When you’re searching for a lender, compare multiple offers. Each lender will offer different terms for their reverse mortgage, so shopping around can help you find a good deal. Look for loans with lower fees, insurance costs, and interest rates, as that will help keep the costs of the loan low and maximize the amount of money you can get out of your home.

Frequently Asked Questions (FAQs)

How does a reverse mortgage work when you die?

When you die, repayment on your reverse mortgage loan will be due. Your heirs or estate can pay the lender in cash to retain the home, sell it and pay off what's owed, or simply give the home to the lender to settle the debt.

How much money can you get from a reverse mortgage?

The amount of money you can receive from a reverse mortgage varies with many factors, including your age, current interest rates, and the amount of equity you have in the home. The more equity you have, the more money you can access.

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The Balance uses only high-quality sources, including peer-reviewed studies, to support the facts within our articles. Read our editorial process to learn more about how we fact-check and keep our content accurate, reliable, and trustworthy.

1. Consumer Financial Protection Bureau. “Avoid Reverse Mortgage Shopping Scams.”
2. Federal Trade Commission. ”Mortgage Relief Scams.”
3. Federal Trade Commission. “Reverse Mortgages.”
4. California Department of Real Estate. “Reverse Mortgages: Is One Right for You?” Pages 1-2.
5. Consumer Financial Protection Bureau. “When Do I Have To Pay Back a Reverse Mortgage Loan?”
6. Consumer Financial Protection Bureau. “How Much Money Can I Get With a Reverse Mortgage Loan, and What Are My Payment Options?”

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