When consulting in Newark, I often encounter cases where people have misunderstandings about reverse mortgages. Common questions include whether it means giving up ownership of the house to the lender or if it results in accumulating debt that the children will have to bear. After addressing these misconceptions one by one, I notice that people's expressions become much more relaxed, so I want to summarize this information in this article.

First, regarding ownership, even if you take out a reverse mortgage, the ownership of the house remains with you. This product is structured so that homeowners aged 62 and older can borrow against the equity of their own home; it does not mean giving the house to the lender. To put it simply, unlike a traditional mortgage where you make monthly payments, you actually receive funds from the lender in a lump sum, monthly payments, or a line of credit. The principal and interest are repaid when the house is sold, the owner passes away, or the home is no longer used as the primary residence. The HECM, which is insured by the Federal Housing Administration, is the most representative type. You can choose how to receive the funds based on your situation, whether as a lump sum, monthly payments, or a line of credit.

The second misconception is about inheritance issues. Thanks to the non-recourse loan structure, even if the value of the home decreases below the loan balance in the future, the heirs are not obligated to pay the difference due to FHA insurance. However, there is an important point to note here. As time goes on, interest continues to accrue on the loan balance, which reduces the equity in the home, and consequently, the inheritance assets left for the children may also decrease. It is important to clarify misconceptions, but it is also crucial to address this aspect together.

The median home price in New Castle County, where Newark is located, is around $395,000 (Redfin, as of February 2026). For households that have owned their homes for a long time, this means they have a significant amount of equity. The effective property tax rate in New Castle County is approximately 0.67% on average (Ownwell), which is relatively high within Delaware. However, Delaware has no state sales tax and does not tax Social Security benefits, so when considering the overall cost of living after retirement, these factors should also be taken into account. If the terminology is unfamiliar, think of it this way: even after taking out a reverse mortgage, the owner is still responsible for paying property taxes and homeowners insurance, and failing to do so could risk losing the home due to default.

We also need to address misconceptions regarding costs. It is true that when you add the origination fees and mortgage insurance premiums (initially around 2% and about 0.5% annually), along with closing costs, the initial costs tend to be higher than those of a traditional mortgage. Delaware has a population over the age of 65 that exceeds 20% of the total, making it one of the states with a high proportion of elderly residents (WHYY, actsretirement). With a large retirement population, these misunderstandings and questions frequently arise.

The third common misconception is about eligibility requirements. Some people believe that if their credit score is low, they cannot apply at all, but in reality, the key criteria are being at least 62 years old, meeting the primary residence requirement, and passing a financial assessment to confirm the ability to continue paying property taxes and insurance. It is also good to know that even if there is an existing mortgage balance, you can apply for a reverse mortgage if it can be paid off with the reverse mortgage loan amount.

Before applying for a HECM, you must go through mandatory counseling with a HUD-approved counseling agency, and since reverse mortgage scams targeting the elderly do exist, take your time and discuss it thoroughly with your family before making a decision. Even after clarifying misconceptions, the actual decision to apply may vary depending on each household's financial situation and future plans, so it is advisable to take your time in making a judgment, and be sure to ask any questions during the counseling process. This article is not investment or legal advice, and it is recommended to consult with a professional before entering into any contracts.