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Reverse Mortgage Loans

A reverse mortgage loan is a type of home equity loan that allows you to convert some of the existing equity in your home into cash while you retain ownership of the property. Equity is the current cash value of a home minus the current loan balance.

A reverse mortgage loan works much like a traditional mortgage, except in reverse. Instead of the borrower paying the lender each month, the lender pays the borrower. As long as the borrower continues to live in the home, no repayment of principal, interest, or servicing fees are required. The funds received from a reverse mortgage loan may be used for anything, including housing expenses, taxes, insurance, fuel or maintenance costs. Because the borrower retains ownership of the home with a reverse mortgage, the borrower also continues to be responsible for taxes, repairs and maintenance.

To qualify for a reverse mortgage loan, you must own your home. You may choose to receive the reverse mortgage funds in a lump sum, monthly advances, as a line-of-credit, or a combination of the three, depending on the reverse mortgage type and the lender. The amount of money you are eligible to borrow depends on your age, the amount of equity in your home, and the interest rate set by the lender.

Depending on the plan selected, a reverse mortgage loan is due with interest either when the last remaining borrower permanently moves, sells the home, dies, or the end of a pre-selected loan term is reached. If the borrower dies, the lender does not automatically sell the home to pay off the loan. Instead, the heirs may pay off the loan, typically by obtaining financing or by using the proceeds generated by the sale of the home.