How It Works
A reverse mortgage, most commonly the Home Equity Conversion Mortgage (HECM) insured by the FHA, allows homeowners aged 62 and older to convert a portion of their home equity into cash without selling the home or making monthly mortgage payments. Instead, the loan balance grows over time and is repaid when the borrower sells the home, moves out permanently, or passes away.
Borrowers can receive funds as a lump sum, monthly payments, a line of credit, or a combination. The amount available depends on the borrower's age, home value, and current interest rates. The older the borrower and the more valuable the home, the more equity can be accessed. All borrowers must complete HUD-approved counseling before obtaining a reverse mortgage.
The loan does not need to be repaid as long as the borrower lives in the home as their primary residence, maintains the property, and stays current on property taxes and homeowners insurance. When the loan comes due, heirs can sell the home to repay the balance, refinance into a traditional mortgage, or walk away. FHA insurance ensures that borrowers or heirs never owe more than the home is worth.
Who Is This For?
- Homeowners age 62 or older with significant home equity
- Retirees who need supplemental income
- Seniors who want to age in place without mortgage payments
- Those who want to delay Social Security for a higher benefit
- Homeowners who need funds for healthcare or living expenses