What is Reverse Mortage ?

A reverse mortgage is a special type of home loan that lets a homeowner convert a portion of the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to you. But unlike a traditional home equity loan or second mortgage, no repayment is required until the borrower(s) no longer use the home as their principal residence. HUD’s reverse mortgage provides these benefits, and it is federally insured as well. There are many other different types of reverse mortgages now available, including reverse mortgages on second homes.

Reverse mortgages are becoming more and more popular every day. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, can help maintain financial independence, or simply improve the standard of living.

The loan limits for the HUD Insured Reverse mortgage product vary by geographic area. The highest of the loan limits—applicable generally to major metropolitan area are currently $362,790. Larger amounts, called Jumbo Loans, are available, when the borrower’s home equity results in a loan amount higher than the HUD maximum. More and more reverse private lender mortgage programs are being introduced into the market all the time.

A study released by The National Council on the Aging shows that reverse mortgages can be used by over 13 million Americans to pay for long-term care expenses at home, allowing many to remain independent and in their homes longer.

Benefits of a Reverse Mortgage include:

  • No payments as long as you live in the home, as long as you pay your real estate taxes and insurance.
  • No taxes owed on the money you receive.
  • You retain the title to your home for life as long as you pay your taxes and insurance.
  • You can receive your money in monthly payments, a credit line, a lump sum, or in any combination.
  • No restriction on how you spend your money.
  • Social Security and Medicare are not affected.
  • No health requirements.
  • It is a non recourse loan with only the home as security for the loan.  Your other assets are not in jeopardy for the mortgage balance when the loan ends.