What is a Reverse Mortgage?
Think of your house like a piggy bank. Usually, you pay money into it every month with a regular mortgage. But with a reverse mortgage, when you’re 62 or older, the bank gives you money from the equity you’ve built in your home.
How It Works
- You still own your home and live in it.
- The bank pays you either in a lump sum, monthly payments, or as a line of credit you can draw from.
- You don’t have to pay it back until you move, sell the house, or pass away.
Qualifying
- Your age matters: the older you are, the more you may qualify to receive.
- The amount of equity you have in your property also determines how much you can borrow.
FHA Protection
Most reverse mortgages are insured by the Federal Housing Administration (FHA), which ensures:
- You will never owe more than the home is worth.
- Any remaining equity after the loan is repaid goes to you or your heirs.
For Your Heirs
When you pass away, your heirs have options:
- They can refinance into a new forward mortgage if they want to keep the home.
- Or they can sell the property and keep any remaining proceeds after the loan is paid off.
Why Use It?
A reverse mortgage allows you to turn your home equity into a financial resource in retirement, providing funds for bills, home repairs, or daily living expenses—without having to leave your home.
Additional Considerations
It’s important to understand that while reverse mortgages provide flexibility and financial relief, they also reduce the equity in your home over time. This means there may be less inheritance left for your heirs, depending on how much you borrow. Careful planning and open family discussions can help ensure everyone understands the benefits and trade-offs.
Reverse mortgages are not “one size fits all.” They work best for homeowners who plan to stay in their home long-term, want to eliminate monthly mortgage payments, and need extra funds for retirement. Speaking with a knowledgeable loan advisor can help you decide if this option is the right fit for your financial goals.
