Reverse mortgages (sometimes called “home equity conversion loans”) enable older homeowners to benefit from their equity without having to sell their home. You can choose to receive these funds in a monthly payment, a line of credit, or a lump sum.
The amount of loan funds you may receive depends on the value of the home and the age of the youngest borrower or eligible non-borrowing spouse.
The loan does not have to be repaid until the borrower sells his home, moves out, or passes away. You or your estate representative is obligated to pay back the reverse mortgage amount, interest accrued, and finance fees at the time your home is sold, or you are no longer living in it.
Reverse mortgages are typically appropriate for borrowers who are at least 62, have a small or zero balance owed against their home, and use the property as their main living place.
Homeowners who are on a fixed income and find themselves needing additional money find reverse mortgages ideal for their situation. Social Security and Medicare benefits aren’t affected, and the funds are not taxable. Reverse mortgages can have adjustable or fixed rates. You cannot lose your home under normal circumstances, but it is important to understand that foreclosure may occur if you do not pay your taxes and/or insurance and otherwise comply with the terms of the loan. You are also responsible for home maintenance.