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Reverse Mortgages

A reverse mortgage (is a type of loan available to seniors (62 and over), used as a way of converting their home equity (the value of the home, minus the amount of any existing mortgages) into one or more cash payments while retaining ownership of the property (continuing to live there) and avoiding monthly payments. Repayment of the loan is deferred until the borrower is no longer living in the home.

A reverse mortgage is a unique type of loan used by older Americans to convert the equity in their homes into cash. The money from a reverse mortgage can provide seniors with the financial security they need to fully enjoy their retirement years. The reverse mortgage has earned its name because the payment stream is "reversed." In a typical mortgage, a home owner pays a monthly amortized amount; after each payment, the owner has more equity in the house. After a certain amount of time (typically 30 years), the mortgage will be paid in full and the property released from the debt. In a reverse mortgage, the home owner pays nothing each month and all interest on the debt is added to the lien on the property. If the owner receives monthly payments, then the debt on the house increases each month. The money from a reverse mortgage can be used for anything from daily living expenses to home repairs and home modifications.

If a house gains significantly in value after a reverse mortgage is taken on it, it is possible to get a second and even third reverse mortgage to borrow against the increased equity that the owner now has in the more valuable house. But, a reverse mortgage must be the first and only mortgage on the property (if there is an existing mortgage, it will be paid off with some of the proceeds from the reverse mortage). If the property increases in value (and as the mortgagee ages and qualifies for more money), the reverse mortgage may be refinanced to borrow more against the increased equity.

Reverse Mortgage Qualifications

To qualify for a reverse mortgage you must be at least 62 and own your own home. There are no income or medical requirements to qualify. You may be eligible for a reverse mortgage even if you still owe money on a first or second mortgage. In fact, many seniors get a reverse mortgage to pay off a first mortgage.