Over the decades of observing real estate in this area, one of the most common questions I receive is whether to trust unsolicited calls offering reverse mortgages. One elderly person mentioned that they were hurriedly asked to sign documents during a free consultation over the phone. Most of these calls are far from formal procedures. I always emphasize that formal procedures are not rushed. From my long-term perspective in this neighborhood, these inquiries follow a recurring pattern every year. If you know the facts, there's no need to worry too much.

Each time, I go over the formal procedures step by step. A formal reverse mortgage is a product where homeowners aged 62 and older receive funds from a lending institution by using their home equity as collateral. Unlike a traditional mortgage that requires monthly payments, funds can be received as a lump sum, monthly payments, or a line of credit, and the loan principal and interest are repaid when the home is sold, the owner passes away, or the home is no longer used as the primary residence. A representative product is the HECM, which is insured by the Federal Housing Administration.

The median sale price in Baltimore City over the last three months is $265,000, which is a 9.4% increase compared to the previous year (Redfin, as of July 2026). The property tax rate is around 1.48%, with the median tax bill being approximately $3,236 annually (propertytaxrates.org, based on 2026 data for Baltimore City County). Even if you have equity, the ability to continue paying this property tax is a key condition for applying. In neighborhoods like Baltimore, which have many older townhouses, the burden of property taxes can feel significantly heavier compared to other areas, so it's advisable not to judge solely based on equity size but to also consider the annual taxes.

In terms of costs, the origination fee, mortgage insurance premium (MIP, initially around 2% + 0.5% annually), and closing costs lead to higher initial costs compared to a traditional mortgage (CFPB). In the formal process, these cost details are clearly outlined in writing. Conversely, if costs are vaguely explained or if there's pressure for an immediate decision, that should raise a red flag. You can choose to receive funds as a lump sum, monthly payments, or a line of credit, and mixing these options is also possible. In a formal process, these choices are explained thoroughly over time, rather than rushing you into one option.

As time goes on, the loan balance increases and equity decreases. This means that the assets passed on to children may diminish. It's common for equity to decrease more quickly than initially expected because interest and insurance premiums continue to accumulate on the balance each month. If property taxes, insurance premiums, and maintenance costs cannot be continuously paid, there is a risk of default. However, HECM is structured as a non-recourse loan, so even if the home value falls below the loan balance, heirs are not required to pay the excess due to FHA insurance.

The clearest criterion distinguishing formal procedures from scams is whether there is a mandatory consultation with a HUD-approved counseling agency. If someone advises skipping this consultation or pressures you to use only a specific lending institution, that itself is a warning sign. In contrast, counseling agencies that follow formal procedures will assess not only the product structure but also the applicant's financial situation, and they do not force decisions on the spot. The population aged 65 and older in Maryland is about 17.3% of the total and is growing faster than the national average (Maryland Matters, based on 2025 census data). An increasing retirement population means that more people need to understand these products accurately.

As the retirement population grows, attempts at scams targeting these products also increase. It's important to note that reverse mortgages are not the only solution. Downsizing or using a traditional home equity loan are also options, so it's safer to compare various alternatives. This article is not investment or legal advice, and I encourage you to review the information with a HUD counselor and family before applying.