What is a reverse mortgage? A reverse mortgage is a special type of home equity loan sold to homeowners aged 62 and older. The loan allows homeowners to access a portion of their home equity as cash. In a reverse mortgage, interest is added to the loan balance each month, and the balance grows. The loan must be repaid when the last borrower, co-borrower or eligible spouse sells the home, moves out of the home, or dies. Most reverse mortgages today are called Home Equity Conversion Mortgages (HECMs). HECMs are federally insured. If you are interested in a reverse mortgage, first see a HECM counselor. How does a reverse mortgage work? After years of paying down your mortgage, you have built up equity (the amount your property is worth today minus the amount you owe on your mortgage and any home equity loan or line of credit) in your home. With a reverse mortgage, you borrow against your equity. The loan balance grows over time. You don’t have to pay back the loan while you or an eligible spouse live in the home, but you still have to pay taxes, insurance, and maintain the home. When both you and any eligible spouse have passed away or moved out of the home, the loan must be paid off. Most people need to sell their home to pay off the loan. But, neither you nor your heirs will have to pay back more than your home is worth.
HUD-approved housing counseling is your best source of information on reverse mortgages Only a serious discussion with a counselor will give you the information you need to make a good decision about your home. HUD approved reverse mortgage counselors have the latest information on reverse mortgages. Tell your counselor everything about your situation. This will help you get the most out of your counseling session. Come to counseling prepared to discuss: § Your financial needs and goals § Your spouse or partner’s future housing and financial needs § The circumstances leading you to consider a reverse mortgage § The alternatives to a reverse mortgage you have considered If you have quotes from reverse mortgage lenders, bring them to counseling. Your counselor can help you compare them. Visit HUD’s website (http://go.usa.gov/v2H) or call (800-569-4287) to find a qualified reverse mortgage counselor near you.