Reverse Mortgage Loan

A reverse mortgage loan is a loan available to seniors over the age of 62 which allows them to convert equity in their home into cash. These loans were created to give seniors access to cash for expenses such as home improvements, unexpected medical costs, and in-home care by utilizing the accumulated equity in their homes.

This type of loan is called a reverse mortgage because instead of the borrower making monthly payments to their lender, as they would with a traditional mortgage, the borrower may choose to not make a payment and let the accrued interest for that month be added to the current loan balance. In many cases the borrower receives a monthly payment from the lender in order to provide them with additional monthly income. Additionally, many reverse mortgage borrowers establish a home equity line of credit and use it as needed. They are billed monthly, but have the option to not make a payment. Unlike a traditional home equity loan or second mortgage, a reverse mortgage does not have to be repaid in full until the borrower no longer occupies the home as their primary residence.

The most common reverse mortgage loan is the Home Equity Conversion Mortgage (HECM) which is insured by the FHA. An alternative option are proprietary reverse mortgages which is not backed by the federal government.

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