Reverse Mortgage
Frequently Asked Questions
A reverse mortgage is a loan designed for homeowners who are 55 years or older, allowing them to convert a portion of their home’s equity into cash. Unlike a traditional mortgage, there are no monthly mortgage payments.
A reverse mortgage allows homeowners aged 55 and older to convert a portion of their home equity into cash. Unlike a traditional mortgage, instead of making monthly payments to a lender, the lender makes payments to the homeowner.
To be eligible, you must be 55 years or older, own your home (or have a small mortgage balance), live in the home as your primary residence, and meet certain financial requirements.
Individuals choose reverse mortgages to tap into their home equity without selling their home, supplement their retirement income, cover healthcare expenses, or make home improvements, among other reasons.
Generally, you have to pay back a reverse mortgage only once you die. However, there are other scenarios where you could be forced to repay it: If you permanently move out, no longer use it as a primary residence, or sell the home.
As with any mortgage, there are conditions for keeping your reverse mortgage in good standing, and if you fail to meet them, you could lose your home. For example, you could lose your home if:
◦ The home is no longer your primary residence.
◦ You decided to move or sell your home.
◦ You don’t pay your property taxes or homeowners insurance.
The funds can be used for any purpose. Common uses include supplementing retirement income, covering medical expenses, paying off existing debts, or making home improvements.
Yes. The main types are the Home Equity Conversion Mortgage (HECM), which is federally insured; proprietary reverse mortgages, which are private loans; and single-purpose reverse mortgages offered by some state and local governments.
Once the borrower passes away or moves out, the loan becomes due. Typically, heirs have the option to repay the loan and keep the home, sell the home to repay the loan, or turn the home over to the lender.
Costs can include an origination fee, appraisal fees, closing costs, mortgage insurance premiums, and servicing fees. Exact costs vary depending on the type and provider of the reverse mortgage.
No, proceeds from a reverse mortgage do not affect your Social Security or Medicare benefits. However, it could affect Medicaid or Supplemental Security Income (SSI) eligibility.
Yes, but the existing mortgage must be paid off using the proceeds from the reverse mortgage or other funds. The remaining equity can then be converted into cash.
A reverse mortgage is typically repaid when the borrower sells the home, moves out, or passes away. The repayment amount includes the amount borrowed, plus accumulated interest and fees. If the home is sold for more than the loan amount, the excess goes to the homeowner or heirs.
