A reverse mortgage is a low-interest loan for senior homeowners that use a home's equity as collateral. The loan amount is a percentage of the home's value determined by the age of the youngest homeowner. The loan does not have to be repaid until the last surviving homeowner permanently moves out of the property or passes away. At that time, the estate has approximately 12 months to repay the balance of the reverse mortgage or sell the home to pay off the balance. All remaining equity is inherited by the estate. The estate is not liable if the home sells for less than the balance of the reverse mortgage.

You can use the funds for anything you choose, such as home improvements,
Medical expenses (including in-home care), unexpected expenses, travel or help pay a
Grandchild’s college tuition.

You may be eligible for Reverse Mortgage even if you still have an existing balance on your mortgage. However, the existing mortgage balance must be paid off at closing. You can choose to pay off the balance with funds from the reverse mortgage or another source.

Generally a home equity loan, a second mortgage, or a home equity line of credit has strict requirements for income and creditworthiness. Also, with other traditional loans you must still make monthly payments to repay the loans. A reverse mortgage has no income or credit requirements and instead of making monthly payments, you receive payments.

With a reverse mortgage the amount you can borrow is determined by an FHA formula that considers your age, the current interest rate, and the appraised value of your home. The older you are, the lower the interest rate. The more valuable your home (up to a certain point), the higher the loan amount will be.

As stated previously, with traditional loans you are still required to make monthly payments, but with a reverse mortgage the loan is not due as long as you live in the home. Also, with a reverse mortgage you cannot be forced to foreclosure or forced to vacate your home because of a missed mortgage payment. However, you are still responsible for real estate taxes, utilities, and maintenance.

Yes. You will always retain the title until your home is sold.

Circumstances that will cause the loan to become due include:

1. The last surviving borrower(s) permanently moves out of the home or passes away,

2. The last surviving borrower(s) fails to live in the home for 12 consecutive months,

3. The borrower(s) fails to pay property taxes or insurance, or

4. The property deteriorates beyond what is considered reasonable.

You cannot outlive a reverse mortgage. As long as at least one homeowner lives in the home (keeping taxes and insurance current) you do not need to repay the loan. Furthermore, you will never owe more than your home's value (a reverse mortgage cannot become "upside down").

No. You are not required to make any payments until the loan is due. However, you have the option to make payments any time you choose. There are no penalties for making payments before the loan is due.

Yes. With a reverse mortgage, you are still the homeowner and are responsible for paying your property taxes each year. However, you can use the funds from your reverse mortgage to pay these taxes.

Yes. It is your responsibility to maintain an acceptable amount of property insurance, including flood and hazard insurance where necessary.

You can choose to receive your funds in a lump sum, regular monthly installments, draw from a line of credit at your discretion, or any combination of these options.

The property must be your primary residence. Single-family, 2–4 unit multifamily, modular, manufactured, planned unit developments (PUD) and condominium homes are eligible. Co-op and mobile homes are not eligible.

No. When the loan is due, the amount owed can never exceed the current market value of your home.

In the event of your death or in the event that you no longer use the home as your primary residence, your estate can choose to convert the reverse mortgage into a traditional mortgage to keep the house or else sell the home to pay the balance (the cash borrowed, interest, and fees).

If the equity in your home is worth more than the amount you owe to the lender, the remaining balance belongs to your heirs. No other assets are affected by a reverse mortgage. For example, investments, second homes, cars, and other valuable possessions cannot be taken from your estate to pay off the reverse mortgage.

If the sale of your home is not enough to pay off the reverse mortgage, the lender must take a loss and request reimbursement from the FHA.