It’s important to read/listen to reverse mortgage sales pitches carefully and to take everything that is said with a grain of salt. That’s not to say that all reverse mortgage ads are dishonest; however, most that I’ve seen push the limits of credulity. It could just be that the sleaziest companies do the most advertising, but regardless, vigilance is crucial.

First of all, reverse mortgages are not a government benefit, and you should be wary of any solicitation that does so much as hint to the contrary. The majority of reverse mortgages are insured indirectly by the government, but this insurance is priced as though it were being underwritten by a private company, and is not subsidized by the government (at least not intentionally). Reverse mortgages themselves are issued and administered by private lenders, and while subject to government oversight/regulation, they are not meted out directly by the government, like social security payments.

Reverse mortgage are NOT free. You might mistakenly assume that this is the case since ads will undoubtedly  promise you that that you won’t have to expend any money in order to obtain one and never have to repay the loan. While this is superficially the case, in reality, all of the upfront costs (which are substantial) as well as the interest, are rolled back into the loan and must be repaid after the borrower passes away or moves out.

In addition, don’t be seduced by the pictures of the “happy borrower,” smiling on the beach or from behind the wheel of a new convertible. While it’s true that the proceeds from the reverse mortgage are not subject to any rules regarding how they can be spent, the program was not designed to fund extravagant purchases. It might seem like a great idea to take that vacation that you have been putting off or buying that sailboat that you have been dreaming of. In reality, if you fund such expenditures using a reverse mortgage, consider not only that you are essentially trading your house for them, but also that if you need to tap the equity in your home for more pressing needs later on, the money will no longer be available.

On a related note, don’t be pressured by “special deals.” Lenders might exhort you to “ACT NOW” to take advantage of low interest rates or a temporary waiver of certain fees. They might warn you that insurance premiums will rise and loan limits will fall. In fact, this sense of urgency is deliberately contrived by the lender to drum up business. It’s true that interest rate are low, but nobody knows if/when they will rise. It’s also true that many lenders have lowered there fees, but again, nobody knows if/when they will rise. Meanwhile, loan limits and insurance premiums are constantly being adjusted by the FHA in accordance with actuarial assumptions about housing prices and life expectancy.

Finally, don’t be fooled by personalized ads. Obtaining a reverse mortgage is extremely easy; as long as you are of a certain age and your home equity is above a certain threshold, qualifying is practically automatic. Chances are that the reverse mortgage lender simply obtained your name because you are over the age of 62, and not because of your specific circumstances. In fact, a low credit score might make you especially vulnerable to reverse mortgage solicitation, because lenders will assume you are more desperate for cash.

In short, remember that reverse mortgage ads aim to persuade as much as inform. Before you make a decision, make sure you have all the facts.