Reverse mortgages, explained
For homeowners 62 and older: turn part of your equity into cash with no monthly mortgage payment. Regulated, useful for some, and not for everyone.
What a reverse mortgage is
A reverse mortgage lets an owner aged 62 or over borrow against their equity and make no monthly mortgage payment. The balance, plus interest, is repaid when the home is sold, the borrower moves out permanently, or the last borrower dies. The most common type is the FHA-insured Home Equity Conversion Mortgage (HECM).
How you can take the money
- A lump sum
- Fixed monthly payments
- A line of credit you draw on
- A combination
What it requires
- At least one borrower aged 62+, living in the home as a primary residence
- Substantial equity; any existing mortgage is usually paid off from the proceeds
- A session with a HUD-approved counsellor before applying
- Keeping up property taxes, homeowners insurance and maintenance
The trade-off
Interest accrues on what you draw, so the balance grows and the equity left in the home shrinks over time. Heirs inherit the home with the loan attached, and the home usually has to be sold or refinanced to settle it.
Who it tends to suit
Owners who intend to stay long-term, want to remove a monthly payment, and are comfortable leaving less equity behind. For many others, a HELOC or a fixed second is a smaller, simpler step.
[Confirm whether any lending partner offers HECM or proprietary reverse mortgages, and in which states. If not, say so here and link to HUD's counsellor search.]