A reverse mortgage is a loan for seniors (62+) that lets them turn their home equity into cash without selling their home. You don’t make monthly payments—instead, the lender pays you. The loan is paid back when you move out, sell the home, or pass away.
How It Works:
- Who Can Get It? You must be 62+, own your home (or have a lot of equity), and live there most of the year.
- How Much Can You Get? It depends on your age, home value, and interest rates. Older people and those with expensive homes usually get more.
- How You Get Paid:
- Lump Sum (all at once)
- Monthly Payments (like a paycheck)
- Credit Line (use money when needed)
- Mix (combination of options)
- Repayment: The loan is due when you sell, move out permanently, or pass away. Your family can repay it by selling the home or using other money. If the home sells for less than the loan, the lender takes the loss.
Types of Reverse Mortgages:
- HECM (most common, government-backed, flexible).
- Proprietary (for expensive homes, private lenders).
- Single-Purpose (for specific needs like home repairs).
Pros:
✔ No monthly mortgage payments.
✔ Cash for retirement, medical bills, or debts.
✔ You keep ownership of your home.
Cons:
✖ High fees and interest.
✖ Less inheritance for family.
✖ Risk of scams if not careful.
FAQs:
- Can I lose my home? Yes, if you don’t pay taxes, insurance, or keep the home in good shape.
- Is it taxable? No, it’s a loan, not income.
- Alternatives? Home equity loans, downsizing, or government aid.
Best Calculators:
Use tools like AARP’s Reverse Mortgage Calculator or HUD.gov’s HECM Calculator to estimate your loan amount.
A reverse mortgage can be helpful but also risky. Before getting one, talk to a financial advisor and compare options. Some seniors use it to cover medical bills or stay in their homes longer. However, fees can add up, and your family might get less money later. Scammers sometimes target seniors, so only work with trusted lenders. If you don’t need cash right away, other choices like a home equity loan or selling the home might be better. Always read the fine print and ask questions to avoid surprises. Planning ahead ensures you make the best choice for your retirement.