How a Reverse Mortgage Works

For many senior citizens who have lived in their homes for some time, a Reverse Mortgage may be a good option for them to explore. This type of safe, Federally-insured mortgage allows you to tap into the equity you have in your home, while still staying in it. The best part is that you don’t have to pay it back! You may have heard of this but don’t know the details.

Who Is Eligible?

Here are the requirements to qualify:

• Be at least 62 years of age or older
• Live in your home as your primary residence and have sufficient equity in it
• Be able to pay any existing mortgages through the Reverse Mortgage
• Live in a single family home, a two to four-unit owner-occupied home, townhouse, approved condominium unit, or certain types of manufactured homes

You must also meet the following conditions:

• Attend a HUD-approved counseling session
• Continue to pay property taxes and homeowners insurance

Getting Cash From Your Home

You can get a Reverse Mortgage even if you have an existing loan or loans, provided you have enough equity and meet the above conditions. After the current liens on the property are paid off, you can choose a number of different ways to receive cash. You can choose to receive the funds all at once, in monthly installments, as a line of credit you can access as you choose, or a combination of any or all of the above.

Regardless of how you choose to receive your reverse mortgage funds, you never make a monthly payment for as long as you live in your home, pay the required taxes and maintain a policy of homeowners’ insurance.

What Happens if the Value of the Home Goes Down?

Congress made sure to protect senior citizens by making Reverse Mortgages "non-recourse" loans, meaning that you can never owe more than your home is worth.

When Does the Reverse Mortgage Have to be Paid Off?

When you sell the home, or when you die and you pass the home to your loved ones in your will or Living Trust, then the Reverse Mortgage has to be paid off. Your loved ones can pay it off with a new loan or with other funds.

So, if you or your spouse are considering a Reverse Mortgage, it would be wise to speak with a qualified lawyer to help you explore different options and to advise you on the structure of the loan.