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10 Things to Know About a Reverse Mortgage

As we age, many of us find ourselves facing financial challenges in retirement. For some, the idea of unlocking the equity in their homes becomes a tempting solution. Reverse mortgages have gained popularity as a financial tool for retirees. In this blog post, we'll delve into the ten key things you need to know about a reverse mortgage before deciding if it's the right option for you or a loved one.

What is a Reverse Mortgage?

A reverse mortgage is a financial product designed for homeowners aged 62 and older. It allows homeowners to convert a portion of their home equity into cash without having to sell their homes or make monthly mortgage payments. Instead, the loan is repaid when the homeowner moves out of the home, sells the home or passes away.

Types of Reverse Mortgages

There are two main types of reverse mortgages:

a. Home Equity Conversion Mortgage (HECM) - The most common type, insured by the Federal Housing Administration (FHA).

b. Proprietary Reverse Mortgage - Offered by private lenders and tailored for higher-value homes.

Eligibility and Requirements

To qualify for a reverse mortgage, you must be at least 62 years old, own your home, and live in the home as your primary residence. Financial assessments are also be required to ensure you can meet ongoing obligations like property taxes and insurance.

Loan Disbursement Options

Reverse mortgage proceeds can be received in various ways, including a lump sum, monthly payments, a line of credit, or a combination of these options. The choice depends on your financial goals and needs.

Interest and Fees

There are different fees compared to a traditional mortgage which protect the heirs and borrower with the loan now being a non-recourse loan.

No Monthly Mortgage Payments

One of the significant advantages of a reverse mortgage is that you no longer make monthly mortgage payments. The loan is repaid when you sell the home, move out permanently, or pass away.

Impact on Home Equity

While a reverse mortgage provides you with cash, it reduces your home equity over time. This can affect the inheritance you leave to your heirs.

Repayment Terms

When the loan becomes due, it can typically be repaid through the sale of the home. If the loan balance exceeds the home's value, the FHA insurance covers the difference, and your heirs won't be held responsible for the debt exceeding the home's value.

Counseling Is Required

Before getting a reverse mortgage, you must undergo counseling with a HUD-approved counselor. This ensures you fully understand the terms, costs, and potential consequences of the loan.

Risks and Alternatives

Reverse mortgages can be a helpful financial tool for many retirees, but they are not suitable for everyone. Before making a decision, explore all options.


A reverse mortgage can provide financial relief for retirees, but it's not a decision to be taken lightly. Understanding these ten key points is crucial before proceeding. Consult with financial advisors and explore all available options to ensure a reverse mortgage aligns with your long-term financial goals and retirement plans.

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