Reverse Mortgage Myths South Dakota Families Believe, And the Truth
By Jeff Buum, Certified Reverse Mortgage Specialist (CRMS) | Fairway Heartland | Sioux Falls, SD | NMLS #400290
jeffbuummortgage.com · 10 min read · Reverse Mortgage
Of all the mortgage products on the market, none carries more misinformation than the reverse mortgage. South Dakota families and their adult children often come in with fears that are understandable but almost always based on inaccurate information that circulated decades ago, when reverse mortgages were far less regulated than they are today.
The HECM program has changed dramatically. Modern reverse mortgages are federally regulated, FHA-insured, and require independent HUD counseling before closing. But the myths have not caught up with the reality. Below are the twelve myths Jeff Buum, a Certified Reverse Mortgage Specialist at Fairway Heartland, hears most often from South Dakota families, and the honest truth about each one.
The 12 Reverse Mortgage Myths, Debunked
Myth 1: “The bank will own my house.”
The reality: The deed to your home stays in your name from the day you close until the day you sell, move out permanently, or pass away. The lender places a lien on the property, exactly the same as any other mortgage, but you remain the owner with all the rights that come with ownership. You can sell the home, leave it to your heirs, or move at any time you choose.
Myth 2: “My children will inherit my debt.”
The reality: A HECM is a non-recourse loan, one of the few mortgage types with this protection built in by federal law. Heirs are never personally liable for the loan balance. When the loan becomes due, the home is typically sold to repay it. If the sale price is less than what is owed, FHA insurance covers the difference. The family owes nothing beyond the home's value.
Myth 3: “I have to own my home free and clear to qualify.”
The reality: You do not need to own your home outright. In fact, one of the most common uses of a reverse mortgage is to pay off an existing mortgage, eliminating the monthly payment entirely. The reverse mortgage pays off the current loan balance first, and any remaining proceeds go to the homeowner. Many South Dakota clients come to Jeff Buum specifically to eliminate their current mortgage payment.
Myth 4: “A reverse mortgage is only for people who are broke.”
The reality: This is perhaps the most damaging myth. Many financially comfortable homeowners, including those who could pay cash for a new home, use a reverse mortgage as a deliberate retirement planning strategy. It can help delay Social Security, reduce portfolio withdrawals, fund long-term care, or preserve investments during a market downturn. Financial planners increasingly recommend it as a first-line tool for clients with significant home equity.
Myth 5: “I could be forced to leave my home.”
The reality: As long as you meet three basic obligations- living in the home as your primary residence, paying property taxes and insurance, and maintaining the property in reasonable condition- you cannot be forced to leave. There is no expiration date tied to your age or how long you've had the loan. The loan becomes due only when you permanently stop living there.
Myth 6: “My heirs won't be able to keep the house.”
The reality: Heirs have multiple options when the loan becomes due. They can sell the home and use the proceeds to pay off the loan, keeping any remaining equity. They can also keep the home by paying off the loan balance or purchasing it at 95% of the current appraised value, whichever is less. If they want to keep a home worth more than the loan balance, they can refinance into a traditional mortgage. Many South Dakota families successfully keep the home.
Myth 7: “Both spouses must be 62 or older.”
The reality: In South Dakota, only one borrower needs to be 62 or older to qualify. A younger non-borrowing spouse can remain in the home after the borrowing spouse passes away or permanently moves out, under specific HUD rules for eligible non-borrowing spouses. This protects younger spouses from being forced out of the home.
Myth 8: “Reverse mortgage interest rates are outrageous.”
The reality: Reverse mortgage interest rates are generally comparable to conventional mortgage rates. They vary by loan type and market conditions; variable rates apply to lines of credit and monthly payment options, while fixed rates apply to lump-sum disbursements. Because no monthly payment is required, the rate's practical impact differs from a traditional mortgage, but the rates themselves are not predatory.
Myth 9: “The government takes the home after I die.”
The reality: The government has no claim on your home. A HECM is a private loan made by a lender — in Jeff Buum's case, Fairway Independent Mortgage Corporation — and insured by the FHA. When the loan becomes due, the home is sold (or retained by heirs who pay off the loan). Any equity remaining after the loan is repaid belongs to the estate and heirs, not the government.
Myth 10: “A reverse mortgage affects Social Security and Medicare.”
The reality: Reverse mortgage proceeds are generally not considered income and do not affect Social Security retirement benefits or Medicare eligibility. They are loan proceeds, not earned income. However, if you receive Medicaid or Supplemental Security Income (SSI), large lump sum payments could affect those need-based benefits. Anyone receiving means-tested benefits should discuss this with an advisor before proceeding.
Myth 11: “I can't get a reverse mortgage on a condo or manufactured home.”
The reality: Condominiums can qualify if the development is FHA-approved. Manufactured homes may also qualify if they meet certain HUD standards and are on a permanent foundation. The eligibility of a specific property is determined during the application process. For a condo or manufactured home in South Dakota, the first step is a conversation, not an assumption that it won't work.
Myth 12: “Reverse mortgages are not regulated and are full of scams.”
The reality: HECM reverse mortgages are among the most heavily regulated mortgage products available. They are governed by HUD, insured by the FHA, and require independent counseling from a HUD-approved agency before any loan can close. The counseling session is specifically designed to protect borrowers by ensuring they understand the loan terms, obligations, and alternatives before making any commitment.
The Truth About Reverse Mortgages
The truth is that a reverse mortgage is a legitimate, federally regulated financial tool, one that genuinely helps many South Dakota homeowners retire with more security, flexibility, and peace of mind. The myths are understandable given how long they have circulated, but they shouldn't prevent anyone from getting an honest assessment of whether a HECM fits their situation.
Frequently Asked Questions
Do I keep ownership of my home with a reverse mortgage?
Yes. You keep the title to your home. The lender holds a lien, exactly as with any other mortgage, but you remain the owner.
Will my kids be stuck with the bill?
No. A HECM is a non-recourse loan, so heirs never owe more than the home's value when it is sold. FHA insurance covers any shortfall.
Is a reverse mortgage a government benefit?
No. It is an FHA-insured loan from a private lender. It is not a government entitlement, and interest and fees accrue over time.
Still have questions? Let's talk through them honestly, with no pressure.
Jeff Buum · (605) 321-7303 · jeff.buum@fairwaymc.com · jeffbuummortgage.com/reverse-mortgage
Copyright©2026 Fairway Independent Mortgage Corporation (“Fairway”) NMLS#2289. 4750 S. Biltmore Lane, Madison, WI 53718, 1-866-912-4800. All rights reserved. Fairway is not affiliated with any government agencies. These materials are not from HUD or FHA and were not approved by HUD or a government agency. Reverse mortgage borrowers are required to obtain an eligibility certificate by receiving counseling sessions with a HUD-approved agency. The youngest borrower must be at least 62 years old. Monthly reverse mortgage advances may affect eligibility for some other programs. This is not an offer to enter into an agreement. Not all customers will qualify. Information, rates and programs are subject to change without notice. All products are subject to credit and property approval. Other restrictions and limitations may apply. Equal Housing Opportunity.
