Recently, a retiree living in Savoy reached out with a worried expression after seeing a news report about reverse mortgage scams. When reports of scams targeting the elderly surface, many people become hesitant about reverse mortgages themselves. So, what is the difference between a legitimate reverse mortgage and a scam?

The first question to address is, what exactly is a reverse mortgage? It is a product that allows homeowners aged 62 and older to receive funds from a lending institution by using their home equity as collateral. Unlike a traditional mortgage, which requires monthly payments, reverse mortgages provide funds in a lump sum, monthly payments, or a line of credit. 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.

So, what is the current housing market like in Savoy? Recent market data shows that the median home price in Savoy is around $415,000 (Redfin, mid-2026). This small town near Champaign-Urbana has seen a price increase of 17.6% over the past year. However, Illinois has a high effective property tax rate of 2.01%, which is among the highest in the nation (Tax Foundation, 2026). It's important to consider not just the equity size but also the ongoing property tax burden each year.

What about the costs? When you add the origination fees and mortgage insurance premiums (MIP, initially around 2% + 0.5% annually), along with closing costs, the initial expenses tend to be higher than a traditional mortgage (CFPB). Additionally, as time goes on, the loan balance increases, which reduces the homeowner's equity and the assets that can be passed on to their children.

What are the risk factors? The biggest risk is that if property taxes, insurance, and maintenance costs are not continuously paid, it could lead to default and loss of the home. Furthermore, as time passes, interest and insurance premiums continue to accumulate on the loan balance, which can result in equity decreasing faster than initially expected. However, HECM operates as a non-recourse loan, meaning that if the home value falls below the loan balance, heirs are not required to pay the difference thanks to FHA insurance. Before applying, applicants must also pass a financial assessment to ensure they can continue to pay property taxes and insurance, so it can be helpful to evaluate this aspect beforehand.

• Are you 62 or older, and is the home your primary residence?
• Can you use the loan to pay off any existing mortgage balance?
• Do you have the financial capacity to continue paying property taxes and insurance?

How can funds be received? If a lump sum is needed, it can be taken as a one-time payment; if a certain amount is needed monthly, it can be received as monthly payments; or if funds are needed as needed, it can be accessed through a line of credit, and combinations of these options are also possible. Which option is best depends on future spending plans, so this is another question to address during the consultation process.

How can you distinguish legitimate procedures from scams? A proper HECM application requires mandatory counseling with a HUD-approved counseling agency before applying. If you receive urgent requests for signatures via unfamiliar phone calls or mail, or if a specific product or lender is being pushed, that itself can be a warning sign. Additionally, small towns like Savoy, which are near college areas, often have many retired households with children or grandchildren living in other regions, so if you receive pressure to process paperwork quickly, it's a good idea to ask for time to discuss it with family first.

This counseling process is meant to ensure that you fully understand the product structure and alternatives; it is not a mere formality. It's also important to note that reverse mortgages are not the only option available. Downsizing or utilizing a traditional home equity line of credit (HELOC) are also worth considering. This article does not constitute investment or legal advice, and it is recommended to have thorough discussions with a HUD counselor and consult with family before proceeding with an application.