Reverse Mortgage
What Is a Reverse Mortgage?
A reverse mortgage is a loan that allows homeowners, typically age 62 or older, to convert home equity into cash without making monthly mortgage payments.
Instead of paying the lender, the lender pays the borrower.
The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM), insured by the Federal Housing Administration.
Why It Matters in a Mortgage
Reverse mortgages can:
- Supplement retirement income
- Provide access to home equity
- Eliminate monthly mortgage payments
However, the loan balance grows over time as interest accrues.
Borrowers must continue paying property taxes, insurance, and maintenance costs.
How It Works
Homeowner receives funds as:
- Lump sum
- Line of credit
- Monthly payments
Loan is repaid when the borrower sells the home, moves out permanently, or passes away.
Reverse Mortgage vs. Traditional Mortgage
Reverse → No monthly principal payments
Traditional → Borrower makes monthly payments
FAQs About Reverse Mortgages
Does the borrower lose ownership?
No, if obligations are met.
Can heirs keep the home?
Yes, by repaying the loan balance.
Does interest accrue?
Yes.
Related Terms
