About Reverse Mortgages

About Reverse Mortgages

8 Things You Need to Know About Reverse Mortgages

You have spent many years in your home, and you have made lasting memories. It is understandable that you would want to remain in it for the rest of your life. For seniors with low incomes, a reverse mortgage can seem like the best way to do that. You get to live in your home for the rest of your life, and receive money to help pay for your expenses. But there is a lot to know about reverse mortgages. This section will answer 8 questions for you and your family about reverse mortgages so that you can make the best choice.

What is a reverse mortgage?

A reverse mortgage is a special type of home loan that will let you switch part of the equity in your home into cash. Equity is the amount of money that you build up over years of home mortgage payments that can be paid to you. With a reverse mortgage, you don’t have to repay the loan until you and your spouse die or sell your home.

Am I eligible for a reverse mortgage?

To qualify for a reverse mortgage, you must be age 62 or older and live in your home. Usually, you also must own your home outright, which means you cannot still be making mortgage payments. But sometimes, you can have just a few mortgage payments left and still be eligible. Also, reverse mortgages are mostly given to low-income seniors.

Is my home eligible?

To be eligible for a reverse mortgage, your home must be a single-family home, a condo, or part of a planned unit development. Some other types of housing are eligible, but co-ops and most mobile homes are not. Your home must be at least one year old and meet the government’s minimum property standards.

How is a reverse mortgage different from a second mortgage?

Unlike a traditional home equity loan or second mortgage, you don’t have to repay the loan until you die or sell your home. Also, with a second mortgage, you have to make payments to a bank. With a reverse mortgage, the bank pays you money to live in your home. But even if you have a reverse mortgage, you still have to pay property taxes.

How much can I borrow?

Although a reverse mortgage is a way to get money, it is still a loan. The amount you can borrow depends on your age, the current interest rate, loan fees, your income, and how much your home is worth. Usually, the more valuable your home is and the older you are, the more you can borrow. You don't make payments, because the loan does not need to be repaid until you and your spouse die or unless you sell your home.

How will I receive payments?

There are different ways you can receive reverse mortgage payments. In general, you would receive monthly payments as long as you live in your home or monthly payments for a certain number of months. Ask your lender for more information on other options.

What if I outlive the loan?

No matter how old you get, you do not need to repay the loan as long as you live in your home.

Without equity, what will I leave my heirs?

When you sell your home, or after you pass away, your estate will repay the money you received from the reverse mortgage, plus interest and other fees, to the lender. After that, if there is any equity left, your heirs will receive the money.

More Help

More information is available on the AARP website.

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