What is a reverse mortgage?
The most common reverse mortgage is the FHA-insured Home Equity Conversion Mortgage, or HECM. It allows eligible homeowners age 62 or older to access a portion of their home equity while retaining ownership of the home.
Borrower responsibilities continue
The homeowner must continue occupying the property as required, paying property taxes and homeowners insurance, maintaining the home, and satisfying other property charges. Failure to meet those obligations can place the loan in default.
How funds may be received
Available options can include a line of credit, monthly advances, a lump sum for certain structures, or a combination. Available proceeds depend on factors such as age, property value, existing liens and current program rates.
When does the loan become due?
The balance generally becomes due after a maturity event, such as the last borrower permanently leaving the home, selling it or passing away. Heirs typically have options governed by the loan and federal rules, but the balance does not simply disappear.
Questions to discuss before proceeding
- How long the homeowner expects to remain in the property
- Existing mortgage payoff and available equity
- Effect on heirs and other household members
- Closing costs, mortgage insurance and interest accumulation
- Alternatives such as a HELOC, home equity loan, sale or downsizing
Counseling with an approved independent housing counselor is required for a HECM before the loan can proceed.
This website is not affiliated with or endorsed by HUD or FHA. Reverse mortgage borrowers remain responsible for taxes, insurance, maintenance and other property charges.