I'm asked all the time, "What is a reverse mortgage, and can you give me an overview of how it works?", and helping people understand how a reverse mortgage works is something I am happy to do. I have provided some overview information here, but please feel free to contact me if you have additional questions.
“My house has been my home for most of my life. I can’t leave, but I can’t afford to stay.”
You live in a home that you’ve watched increase in value for years. You find it difficult keeping up with bills and healthcare expenses. You’re faced with a dilemma: sell the house—your home, which really doesn’t have a price tag—or continue to live in it and watch your financial burden increase. Now imagine this dilemma resolved.
Enter The Reverse Mortgage
A reverse mortgage allows you to draw on the equity in your home without having to sell it. A “reversal” of a conventional mortgage where you would pay monthly principal and interest payments, a reverse mortgage is a loan that may allow you to receive monthly payments. The loan is repaid when you sell your home, the last borrower passes away, or you no longer live there as the principal residence*. However, there are some circumstances that could cause the loan to become due and payable such as non-payment of property taxes, homeowners, or flood insurance. As a borrower, you must continue to pay property-related fees, taxes, and insurance, and must maintain the home in good condition. You can use the cash payments as you wish: to supplement your retirement income, make home improvements, pay bills, or vacation. It’s all up to you.
Deciding whether or not to go forward with a reverse mortgage is a big decision. If you are still learning about reverse mortgages we direct you to our Top 10 Reverse Mortgage Questions. Here you will learn the ins-and-outs of what to expect from a reverse mortgage.
* Extended absences from the home could trigger loan repayment. Credit is subject to age, minimum income guidelines, credit history, and property qualifications. Program rates, fees, terms and conditions are not available in all states and subject to change.