Understanding The Basics
What makes it a "reverse" mortgage?
A reverse mortgage is a loan whose features make it essentially the reverse of a traditional "forward" mortgage:
That last feature - the ability to turn your equity into income - is what most distinguishes a reverse mortgage from other loans, and it's what makes it so valuable to many senior homeowners. Having spent years repaying the mortgage that allowed you to buy your home, you can now tap into that investment to help you achieve your goals later in life.
However you plan to use your equity - whether traveling, paying medical expenses, improving your home, or just adding a bit of cushion to your monthly budget - you'll have a golden opportunity to put your nest egg to good use.
What happens to my home?Nothing. You remain the owner for as long as you live there, and you will never be forced to move. If you decide to sell or move from your home, the outstanding balance of your reverse mortgage will become due, just as it would with a traditional mortgage.
Unlike a traditional mortgage, however, your balance can never exceed the value of your home when you sell it. So no matter how much money you receive through your reverse mortgage, you will never owe more than your home is worth. Having that assurance is important. After all, you've put a lot of money into your home, and you should have control over how to take it out.
Who is eligible?
To be eligible for a reverse mortgage, all owners listed on the home's title must be at least 62 years of age and occupy the home as their principal residence for the majority of the year. The property must be a single-family or a two-to-four unit dwelling. Townhomes, detached homes, condominium units, planned unit developments (PUDs), and some manufactured homes are also eligible.
Speaking with an approved reverse mortgage counselor is another important eligibility requirement. The Department of Housing and Urban Development (HUD) supervises counseling agencies that can work with you in person or, more commonly, over the phone. We can provide you with a list of authorized counselors.
Next: How Your Loan Works
The Four Nevers of Reverse Mortgage
Never have to make a monthly payment
Never be forced to move
Never owe more than the sale price of your home
Never give up title and ownership of your home