Get your sales revenue back: Debunking 5 common myths
As a record number of Americans retire this year, many are doing so with less money than they would like. But in some cases, that can be offset by a big – but welcome – boost to their home values. Financial planners often recommend home equity as a source of cash flow to help supplement income in retirement. However, misconceptions about retrograde feeding – a unique tool that allows elderly people to tap their balance at home – are commonplace.
“It’s not a one-size-fits-all tool,” says Zachary Barton, certified public accountant and founder of Barton Financial Group. But “If you use it right, it’s a great tool.”
Industry experts and experienced homeowners often agree. In a survey of 2024 for slock, 62% of respondents agreed that payday loans offer more financial freedom in retirement, as long as they know how to work.
Here are some of the misconceptions about chargebacks, including how they arise and how to separate fact from fiction.
Myth #1: Refinances are shady
Over the years, financial regulators have introduced many consumer protections when it comes to repurchase funds, especially HECMS, which are the most common type.
HECMS are Federally Insured products that require lenders to follow guidelines set by the Federal Housing Administration (FHA). As part of the application process, every borrower must complete a counseling course to learn about reverse mortgages and prepare for their favorable status.
Also, now there is a way for the partners to stay at home if they are not included in the loan list, and the lenders have to take more steps in advance to melt the lenders to enter the street.
Today’s borrowings are a far cry from the late-night infomelecial of the ’90s, but that name hasn’t budged easily. “Everybody seems to have a standard comparison,” Barton said. “I don’t feel like the product was bad. They just missed it.”
When he thinks a deferred loan might be a good fit for a client, he usually presents the idea over the course of a few meetings. That gives clients time to process their feelings after seeing the numbers on how to maximize their retirement plan and ultimately come to a comfortable decision.
Myth # 2: Refinancing the loan is a last resort
If the reverse loan is unreliable, according to the same sentiments, then the only people using them must be out of options. It’s true that these secured loans can provide much-needed cash flow to people who don’t have other assets to keep them going in retirement. But in general, it’s best to use a compounding loan as a way to diversify your retirement portfolio, similar to how you would diversify your investment portfolio.
In fact, when set up correctly, they can be a boon for well-earned retirees. It is possible to set up a reverse mortgage to provide fixed monthly payments that cover fixed costs such as your property tax and home insurance for as long as you live, providing an additional layer of security that you would not get with invested savings.
You can also set up collateral as a revolving line of credit that you can access as needed – for example, when a market downturn results in a loss of capital. Doing this can reduce the chances of selling stocks in your portfolio when it’s low, according to Barton. “And when you do that, you can actually reduce how much you need to retire,” he says.
But the Big Testament comes from a 2016 study by a financial planning organization that looked at how retirement portfolio options will play out over time. Simulations show that homeowners who take out a secured line of credit early in retirement double their odds of success (ie, not running out of money) during their 30-year retirement.
Excluding the bonds, the portfolio in the Model had a 40% chance of having enough money beyond three years’ retirement. However, with a revolving loan, those odds rise to 80%.
Myth #3: Refinances are expensive
This is a problem that Barton says he encounters often, adding a caveat that is “expensive” for the relative. Paying back a loan has upfront costs, not unlike owning an asset. That can add up to several thousand dollars, but with a revolving loan, you can even roll those costs into your loan amount.
But unlike traditional mortgages, lenders don’t have to make recurring payments. That’s the main reason most lenders choose reverse mortgages, after all. Instead, the loan balance charges up later, with interest and fees added each month.
As long as you continue with the loan obligations (more on those below), the balance is not paid until you leave the home permanently. But you – or your property – usually won’t owe more than your home is actually worth, no matter how much your balance grows.
Myth #4: Your heirs will not inherit your estate
Another common misconception about reverse mortgages is that your heirs won’t be able to enjoy your home after you’re gone. But there is nothing in the mortgage loan documents that does not include heirs – and in fact, they can get some benefits in the end of the home.
When the time comes, your heirs get to decide what to do with your home: Sell it, turn it over to a lender or pay off a loan to recoup your savings. If the Reverse Reserver Reserge Balage grows larger than your home is actually worth – which happens when the interest and cash flow is only 95% of the value it has to repay or save. In other words, they can get a 5% discount on your home.
Importantly, heirs are not required to sell the home to satisfy the loan balance. They have the option of paying off the loan in cash or by taking out a new mortgage.
“I think people worry a lot about that. Most of the time, children of older people don’t want to go into the house where their 85-year-old parents live.” Barton said. “So, what’s the difference between selling a house with a repossession, versus a traditional foreclosure?”
Myth # 5: You will never have your home again
Another common myth is that mortgage lenders don’t own money they don’t own. As with a typical loan, you are the legal owner of the home, title and all. But if you have a mortgage – go ahead or Go back – your borrower also has a lien on your home. That allows them to foreclose on your home if you don’t meet the terms of your contract. For a revolving loan, which includes:
- Living in your home to the fullest: Most revertages are reversed when the borrowers reach full-time retirement or die. At that point, you no longer need a home anyway.
- Current stay home improvement: You must keep your home in a safe, orderly and breathable condition. Make sure you can afford regular maintenance and smoothing.
- Customs and insurance compliance: You need to stay current on yourself and keep your home pest-proof, too.
“If you have a recurring asset … you should reduce Chances are you can’t pay your taxes,” Barton said. In that sense, a mortgage can help you stay in your home, not foreclosed, for a short period of time.
Editor’s note: This story was originally reported and published in March 2025. We have updated it with current information.
More from money:
How the ‘Bleved Inwey’ strategy can increase your retirement mobility
Will you need long-term care? Here’s what the math says
Refinancing: How to choose between a lump sum, a line of credit or a monthly payment
