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Reverse Mortgage

A REVERSE MORTGAGE is for those 62 and older who may be looking for money to finance a home improvement, supplement your retirement income, or to pay for healthcare expenses. This home loan allows you to convert part of the equity in your home to cash without having to sell your home or pay additional monthly bills.

In a reverse mortgage, you receive money from the lender, and generally don’t have to pay it back for as long as you live in the home. The loan is repaid when you die, sell your home, or when your home is no longer your primary residence. The proceeds are generally tax free, and many of these mortgages have no income restrictions.

Three types of Reverse Mortgages:

  • Single-Purpose Reverse Mortgages – this is offered by some state and local government agencies and non-profit organizations
  • Federally-Insured Reverse Mortgages – this is known as Home Equity Conversion Mortgages (HECMs) and backed by the U.S. Department of Housing and Urban Development (HUD)
  • Proprietary Reverse Mortgages – this is a private loan that is backed by the companies that develop them
The least expensive option of those listed is the single-purpose reverse mortgage, however they are not available everywhere and can be used for only one purpose which is specified by the government or nonprofit lender. As an example, the lender might say that the loan may only be used for home repairs, improvements or property taxes. Most people with low or moderate income can qualify for these loans.

HECM’s and Proprietary reverse mortgages may be more expensive than a traditional home loan, and the up-front costs are high. HECM loans are widely available, have no income or medical requirements, and can be used for any purpose.
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