A reverse mortgage is “a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash.” With a reverse mortgage, residents do not have to qualify on the basis of income. They will remain the owner of their home like an ordinary home mortgage. With a reverse mortgage, the homeowners are still responsible for paying their property taxes and homeowner insurance, as well as making any necessary repairs and maintenance.
Reverse mortgages can be used for paying off credit card or mortgage debt, taxes, services needed (e.g., in-home care or repairs to a home), and medical expenses (e.g., hearing aids and assistive devices for the home).
Owners can convert the value of their home into cash without having to sell it, move out or make monthly payments to a loan company or bank. One of the largest fallacies about a reverse mortgage is the belief the bank or the government will own the home once it’s sold or the owner passes away. That simply is not true. Owners always retain title and remaining equity in their home.
Payments do not typically have to be paid until the homeowner passes away, sells their home or permanently moves out of the home for more than one full year. Homeowners 62 years of age and older are eligible for this type of loan. An appraisal of the property must be done before proceeding with the reverse mortgage.
The amount of money an owner receives may vary. Generally speaking, the older the homeowner is, the more cash is received. Likewise, the greater the value of the home, the more cash available. Old debt, such as an original mortgage, must be paid off before getting a reverse mortgage, or it must be paid off with the money obtained from the reverse mortgage.
Like any other mortgage, reverse mortgages must be repaid. Repayment comes due and payable when the last surviving homeowner (e.g., a spouse) dies, sells the home or permanently moves out.