A reverse mortgage lets eligible homeowners, generally age 62 and older, convert a portion of their home equity into cash, a line of credit, or monthly payments without selling the home or taking on a traditional monthly mortgage payment.
The most common reverse mortgage is a Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration. The loan balance grows over time as interest and fees accrue. You do not make monthly principal and interest payments. The loan becomes due when the last borrower sells the home, moves out for an extended period, or passes away.
Reverse mortgages are most often used by retirees who want to supplement income, eliminate an existing forward mortgage payment, or create a standby line of credit. They are not a quick-cash tool. They work best as part of a longer-term retirement plan.
A reverse mortgage is a loan that must be repaid when the borrower no longer occupies the home as a primary residence. Fees and interest accrue over time and reduce the equity available to you and your heirs. Borrowers remain responsible for property taxes, homeowners insurance, and home maintenance. Failure to meet these obligations can result in foreclosure. HUD requires independent counseling before you can complete a HECM application.
For a neutral, no-pressure walk-through of whether a reverse mortgage fits your situation, book a call below.
Related glossary terms
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Both let you tap home equity. The right tool depends on what you need the money for, how long you need it, and what your current first mortgage looks like.
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