What Is a Reverse Mortgage?
A reverse mortgage is a loan available to homeowners 62 years or older that allows them to borrow against the equity in their home. Unlike traditional mortgages, the lender pays the homeowner - either through monthly payments, a lump sum, or a line of credit.
The loan is repaid when the homeowner sells the home, moves out permanently, or passes away. The most common type is the Home Equity Conversion Mortgage (HECM), insured by the FHA.
General Guidelines
- Must be 62 or older
- Must live in the home as a primary residence
- Must have significant equity in the home
- Must maintain the property and pay property taxes and insurance
Pros
- No monthly mortgage payments
- Access to tax-free cash
- Flexibility in how funds are received
- Can improve quality of life in retirement
- You retain ownership of your home
Cons
- Reduces home equity over time
- May affect eligibility for certain government benefits
- Heirs may inherit less
- Fees and closing costs can be higher than traditional loans
Who Is the Best Candidate?
- Seniors who want to stay in their home long-term
- Homeowners with substantial equity and limited income
- Those seeking supplemental income for retirement expenses
- Individuals who prefer not to sell or downsize
General Recommendations
- Consult with a trusted mortgage professional to understand your options
- Consider your long-term housing plans
- Discuss with family members or heirs
- Review all costs and implications carefully
FAQs
Q: Will I lose ownership of my home?
A: No. You retain the title as long as you meet loan obligations.
Q: Can I outlive the loan?
A: No. As long as you live in the home and meet requirements, the loan doesn’t need to be repaid.
Q: What happens when I pass away?
A: Your heirs can repay the loan and keep the home or sell it to pay off the balance.
Q: Are reverse mortgage proceeds taxable?
A: No. The funds are considered loan proceeds, not income.
Ready to Explore Your Options?
A reverse mortgage could be the key to a more secure and comfortable retirement. Let’s talk about whether it’s right for you. Contact us today for a free, no-obligation consultation. We’re here to guide you every step of the way.
