Short Answer
A reverse mortgage is a loan available to homeowners aged 62 and older that allows them to convert part of their home equity into cash without selling the home or making monthly mortgage payments. The loan is repaid when the homeowner sells the home, moves out permanently, or passes away. It is designed for seniors who need additional income in retirement but want to stay in their home.
A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a Federal Housing Administration insured loan. The borrower receives payments from the lender, either as a lump sum, monthly payments, or a line of credit. The loan balance grows over time as interest accrues, and the borrower never owes more than the home's value at the time of repayment. The borrower must continue to pay property taxes, homeowners insurance, and maintain the property. Reverse mortgages can be a valuable financial tool for retirees who are house-rich but cash-poor, but they come with upfront costs including mortgage insurance premiums and origination fees. Before getting a reverse mortgage, homeowners are required to complete a counseling session with a HUD approved counselor to ensure they understand the terms and alternatives.
Bob's Advice
Redfin Senior Agent · AI Certified Agent
A reverse mortgage can be a lifeline for seniors who want to age in place, but it is not right for everyone. The fees can be significant, and it reduces the equity you leave to your heirs. If you are considering a reverse mortgage, I recommend talking to a financial advisor and a HUD approved counselor first. I can refer you to trusted professionals who specialize in helping seniors make these important decisions. It is a tool, not a solution, and it deserves careful consideration.
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