Overview
A reverse mortgage is a type of loan available to homeowners who are typically 62 years of age or older. It allows homeowners to convert a portion of the equity in
their home into cash while still retaining ownership of the home. Unlike traditional mortgages, where borrowers make monthly payments to a lender, with a reverse mortgage, the lender makes payments to the borrower, either in a lump sum, a line of credit, or monthly payments. Reverse mortgages can provide financial flexibility for older homeowners who have significant equity in their homes and need additional income in retirement.
Eligibility
To qualify for a reverse mortgage, homeowners must typically be 62
years of age or older and have significant equity in their home. The home must
also be the borrower's primary residence.
Loan Repayment
Unlike traditional mortgages, where borrowers make monthly
payments to pay off the loan, with a reverse mortgage, borrowers do not need to
make any payments as long as they continue to live in the home. The loan is
typically repaid when the borrower sells the home, moves out permanently, or
passes away
Type of payments
Reverse mortgages offer different payment options, including
a lump sum payment, a line of credit that can be drawn upon as needed, or monthly
payments for a specified term or for as long as the borrower lives in the home.
Loan Amount
The amount of money that homeowners can borrow with a reverse
mortgage depends on factors such as the borrower's age, the appraised value of
the home, and current interest rates. Generally, the older the borrower and the
more valuable the home, the higher the loan amount.
Ownership and Responsibilities
With a reverse mortgage, homeowners retain ownership of their home and are responsible for paying property taxes,
homeowners’ insurance, and maintenance costs. Failure to meet these obligations
could result in defaulting on the loan.
