Reverse Mortgages Explained
For some home owners, the extra cash received from borrowing on the equity of a mortgage can provide the support needed to put financial strain at ease. Learn more about reverse mortgages and how they work.
What is a Reverse Mortgage?
A reverse mortgage is a type of loan that allows home owners aged 62 and older, to access part of their home’s equity as tax-free income.
Unlike conventional mortgages where homeowners make monthly mortgage payments to the lender, the lender distributes the funds to the homeowner which can happen in a variety of ways.
A reverse mortgage allows the homeowner to continue to live in the house and a monthly mortgage payment is not required as long as the property taxes and insurance and applicable HOA dues are paid. Just like any mortgage, the loan must be repaid when the borrower dies, sells the house, or moves out of the property.
Who Issues Reverse Mortgages?
Most reverse mortgages are issued through government-insured programs. One of the most popular is the Home Equity Conversion Mortgage (HECM). Typically, these loans have strict rules and lending standards to protect the borrowers.
There are also private, or proprietary reverse mortgages. These are issued by private lenders and are not federally insured.
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