Reverse Mortgage

A reverse mortgage is a loan that allows A homeowner who is 62 or older and has considerable home equity to borrow money against the value of their home and receive funds as a lump sum, fixed monthly payment, or line of credit.  This loan program doesn’t require the homeowner to make any loan payments during their lifetime.

How a Reverse Mortgage Works

Instead of the homeowner making payments to the lender, the lender makes payments to the homeowner. The homeowner gets to choose how to receive these payments and only pays interest on the proceeds received. The interest is rolled into the loan balance so that the homeowner doesn’t pay anything upfront. The homeowner also keeps the title to the home. Over the loan’s life, the homeowner’s debt increases and home equity decreases.

The home is the collateral for a reverse mortgage. When the homeowner moves or dies, the proceeds from the home’s sale go to the lender to repay the reverse mortgage’s principal, interest, mortgage insurance, and fees. Any sale proceeds beyond what was borrowed go to the homeowner. 

Who Is a Reverse Mortgage Right For?

A reverse mortgage might sound a lot like a home equity loan or a home equity line of credit (HELOC). However, this program can provide a lump sum or a line of credit that you can access as needed, based on how much of your home you’ve paid off and your home’s market value. Unlike a home equity loan or a HELOC, you don’t need to have an income or good credit to qualify, and you won’t make any loan payments while you occupy the home as your primary residence.

A reverse mortgage is the only way to access home equity without selling the home for seniors who:

• Don’t want the responsibility of making a monthly loan payment
• Can't afford a monthly loan payment
• Can’t qualify for a home equity loan or cash-out refinance because of limited cash flow or poor credit

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