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Reverse Mortgages 101


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A Reverse Mortgage is a method of receiving an income based on the equity in your house (the difference between what you owe and the market value.)

A Reverse Mortagge is the opposite (reverse) of a regular mortgage.

  • With a regular mortgage, you borrow a sum of money. The amount of the debt decreases as you pay back the loan in installments according to an agreed schedule. The loan is secured by property: if you do not repay the loan as agreed, the lender can sell the property to recover the amount of the debt.
  • On the other hand, a reverse mortgage is a way to receive money from your home without making monthly payments or selling it.  With a reverse mortgage, you receive an income, a sum of money, a line of credit or a combination of income, money and line of credit.  As a general matter, a loan under a reverse mortgage does not have to be repaid until one of the following events occurs: you move out of your house for more than a year, the house is sold, or the last borrower dies. At the death of the last borrower, the heirs can pay off the loanthrough the use of a traditional mortgage or by refinancing and keep the house or sell it to pay off the debt.

Reverse mortgages are for people who are age 62 or over who own a home. From the lender's point of view, your health condition is not one of the factors considered when determining whether to give you a reverse mortgage or how much cash you will receive. 

Because of the high costs involved, from an economic point of view, a reverse mortgage may not be a good economic choice for a person with a short life expectancy. However, if a reverse mortgage allows you to stay in your house, it's up to you whether quality of life trumps economics. 

A reverse mortgage is particularly good for a person who has few assets other than a home.

Like regular mortgages, reverse mortgages come with a choice of interest that is fixed (a fixed-rate) or adjustable (an adjustable-rate).

Several  reverse mortgage loan programs are available.

  • HUD (US Department of Housing and Urban Development) offers a Home Equity Conversion Mortgage (HECM). 
  • Fannie Mae Home Keeper Mortgages are available through banks and mortgage companies.

The federal government requires borrowers to attend a counseling session before entering into a Reverse Mortgage.

For additional information about Reverse Mortgages, please see:


  • If a spouse or partner lives with you and is not listed as a borrower on the mortgage, he or she can continue to stay in the home after your demise as long as it is still his or her primary residence. 
  • A HECUM Reverse Mortgage can also be used to purchase a new home. For more information, click here.
  • If your children are in the right financial position, consider a private reverse mortgage - a transaction in which a family member replaces the bank. For example, the person can agree to give you a monthly check and pay for any major home repairs. You agree to repay the loan plus interest and any money spent on maintenance. If the loan is not paid before, it is payable on death. There will be less up-front costs and fewer ongoing costs. Interest can be lower than what a bank would charge, subject to an IRS.minimum.  Do not attempt to create this type of transaction without the advice of a lawyer or an accountant. If you don't have one, click on the link for information about choosing a lawyer or an accountant
  • For additional ideas about dealing with a financial crunch, click here. For instance, if you have life insurance, you may be able to accesss money from a policy now, while you are still alive. For additional information, click here.

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