By SVA Publications

A reverse mortgage allows homeowners 62 and older to convert home equity into cash without selling their home. Understanding how these loans work helps you decide if one might be right for your situation.

How It Works

Unlike a traditional mortgage where you make payments to the lender, a reverse mortgage pays you. You can receive funds as a lump sum, monthly payments, or a line of credit. The loan is repaid when you sell the home, move out permanently, or pass away.

Requirements

You must be at least 62 years old and own your home outright or have significant equity. The home must be your primary residence. You must continue paying property taxes, insurance, and maintenance costs.

Potential Benefits

A reverse mortgage can supplement retirement income, pay for healthcare costs, or fund home modifications. You remain the homeowner and can stay in your home. The loan amount never exceeds the home value, protecting heirs from debt.

Considerations

Fees and interest reduce the equity remaining in your home over time. If you want to leave your home to heirs, a reverse mortgage may not align with that goal. Required counseling before obtaining a reverse mortgage helps ensure you understand the implications.

Consult with a HUD-approved counselor and consider talking with a financial advisor before making a decision.