The Truth About Reverse Mortgages: Separating Fact from Fiction

A reverse mortgage is a type of loan that allows homeowners, who are at least 62 years old, to convert some of their home equity into cash. Unlike a traditional mortgage where the borrower makes monthly payments to the lender, the lender pays the borrower in installments or in a lump sum.

The benefits of a reverse mortgage include the ability to access cash without having to sell your home, the ability to continue living in your home, and no monthly mortgage payments. Additionally, the funds from a reverse mortgage can be used for any purpose, such as home repairs, medical bills, or living expenses.

The drawbacks of a reverse mortgage include the high fees and closing costs, the potential for the loan balance to exceed the value of the home, and the fact that the heirs of the borrower may have to sell the home to repay the loan. Additionally, the borrower must continue to pay property taxes, homeowner’s insurance, and maintenance costs.

Whether or not a reverse mortgage is a good option for you depends on your individual financial situation and goals. It is important to consider the costs and potential risks of a reverse mortgage before deciding if it is right for you.

Yes, it is possible to lose your home with a reverse mortgage if you do not meet the loan requirements, such as paying property taxes and homeowner’s insurance, or if you default on the loan. However, the lender cannot take the home as long as the borrower or their heirs pay off the loan balance.

To qualify for a reverse mortgage, you must be at least 62 years old and own your home outright or have a low mortgage balance that can be paid off with the proceeds from the reverse mortgage. Additionally, you must receive counseling from a HUD-approved counselor to ensure that you understand the risks and benefits of a reverse mortgage.

The amount of money you can get from a reverse mortgage depends on several factors, including your age, the value of your home, and the current interest rates. Generally, the older you are and the more valuable your home is, the more money you can get.