10 frequently asked questions about reverse mortgages:

What is a reverse mortgage?

A reverse mortgage is a loan that allows homeowners aged 62 or older to access the equity in their home. Rather than making monthly payments to the lender, as with a traditional mortgage, the lender makes payments to the borrower. The loan is repaid when the borrower sells the home, moves out, or passes away.

How does a reverse mortgage work?

With a reverse mortgage, the lender pays the borrower based on the equity in their home. The loan does not need to be repaid until the borrower sells the home, moves out, or passes away. The borrower continues to own and live in the home during the life of the loan. Interest is added to the loan balance over time, so the amount owed increases. The loan balance cannot exceed the value of the home.

Who is eligible for a reverse mortgage?

To be eligible for a reverse mortgage, the borrower must be at least 62 years old and have sufficient equity in their home. They must also live in the home as their primary residence and be able to pay property taxes and insurance.

What types of homes are eligible for a reverse mortgage?

Single-family homes, multi-family homes (up to four units), condominiums, and manufactured homes built after 1976 are eligible for a reverse mortgage.

How much money can I get from a reverse mortgage?

The amount of money a borrower can get from a reverse mortgage depends on several factors, including the value of the home, the borrower’s age, and the interest rate.

How is the loan amount determined?

The loan amount is determined by a combination of factors, including the value of the home, the borrower’s age, the interest rate, and the lending limit set by the Federal Housing Administration (FHA).

What are the costs associated with a reverse mortgage?

The costs associated with a reverse mortgage can include origination fees, closing costs, servicing fees, mortgage insurance premiums, and interest.

Will I still own my home if I take out a reverse mortgage?

Yes, the borrower retains ownership of the home when they take out a reverse mortgage.

When do I have to pay back the reverse mortgage loan?

The reverse mortgage loan is repaid when the borrower sells the home, moves out, or passes away.

How does a reverse mortgage affect my estate and heirs?

When the borrower passes away, their heirs can either repay the reverse mortgage loan or sell the home to repay the loan. If the home is sold for more than the loan balance, the excess proceeds go to the borrower’s estate. If the home is sold for less than the loan balance, the lender takes the loss. Heirs are not personally responsible for the loan balance beyond the value of the home.