Understanding Reverse Mortgages: What Families Need to Know
Reverse mortgages can help seniors access home equity, but they're complex. Learn the pros, cons, and implications.
A reverse mortgage lets homeowners 62+ borrow against their home equity without monthly payments. Here's what to know.
How Reverse Mortgages Work
- Homeowner receives money (lump sum, line of credit, or payments)
- No monthly mortgage payments required
- Loan balance grows over time
- Repaid when owner moves, sells, or passes away
Types of Reverse Mortgages
HECM (Home Equity Conversion Mortgage)
- FHA-insured
- Most common type
- Counseling required
- Limits on how much you can borrow
Proprietary Reverse Mortgages
- Private loans
- May allow larger amounts
- Fewer protections
Requirements
- Age 62 or older
- Own the home outright or have significant equity
- Live in the home as primary residence
- Complete counseling with HUD-approved counselor
- Stay current on property taxes, insurance, and maintenance
Pros
- Access home equity without selling
- No monthly payments
- Can stay in home
- Non-recourse loan (can't owe more than home's worth)
Cons
- High fees and closing costs
- Reduces inheritance for heirs
- Loan balance grows over time
- Must maintain home, pay taxes and insurance
- Moving out triggers repayment
For Caregivers
If your parent has a reverse mortgage:
- Ensure taxes and insurance stay current
- Home must remain primary residence
- Extended hospital stays can trigger issues
- Understand what happens when they pass