What’s a Reverse Mortgage?

Is a Reverse Mortgage Right for You?

Whether or not to get a reverse mortgage is a hot topic for a number of people. The pros and the cons are heavily debated and many people are confused about what a reverse mortgage actually is. If you’ve been wondering if a reverse mortgage is right for you, we’ve got the information you need in order to make a wise and informed decision.

What is a Reverse Mortgage?

A reverse mortgage is a loan that allows people ages 62 and up to get the money they need for any expenses they may have. Unlike traditional mortgages, there are no monthly payments on a reverse mortgage. The reverse mortgage isn’t paid until the person who took out the mortgage moves, sells the home or passes away. At that time, the reverse mortgage is paid out of the proceeds of the home sale.

What’s the Debate About?

There are many misunderstandings about what a reverse mortgage is and what it isn’t. Some people think that a reverse mortgage puts them at risk of being pushed out of their home. This is never the case. A reverse mortgage does, however, impact those who would inherit your home. Since the reverse mortgage needs to be paid from the proceeds of the sale of the home, the person inheriting the home would only inherit the money that is left after paying off the mortgage.

When Do I Get My Money?

When you get the money depends on which payment option you choose. When taking out a reverse mortgage, you have a choice as to whether you want the money in one lump sum or whether you want the money sent to you in monthly installments. Many people who are taking out a reverse mortgage as a means of income prefer the monthly installment option whereas people who have a large expense they need to pay for opt for the lump sum.

How Do I know if it’s Right for Me?

When applying for a reverse mortgage, there is mandatory counseling involved. You can choose a counselor from the list provided by the U.S. Department of Housing and Urban Development. This counselor will answer any questions you may have and will help you decide if a reverse mortgage is right for you.


Excellent article. We've had a reverse mortgage for 6 months and don't regret getting it at all. It lets us live a more comfortable life style, and funds are there when we need it. The pre-counseling is great, they cover everything. We sure recommend it.

What is the guidelines on equity in a home? Is a reverse mortgage only for those who have been in their homes for so many years? How long then do you need to have been paying on a mortage will you be considered for a reverse mortgage.

What would happen if the local housing market reversed? For example, what if a home appraised for $250K was reverse mortgaged, and then ultimately sold for only $150K? It sounds like this would create a $100K deficit. Who is responsible for this, the heirs, or the mortgage company?

I found this Q&A on a banking website:
Q.What if I owe more than my home is worth?
A.All reverse mortgages are “non-recourse” loans, which mean that the borrower can never owe more than the value of the home regardless of loan balance.


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