Overview of Reverse Mortgages

You can’t take it with you. But a reverse mortgage presents the next best option. With a reverse mortgage, you can get a loan for cash, based on the value of your home, and you do not have to pay the loan back for as long as you continue to live in the house.

The reverse mortgage is very useful for senior citizens who may have a low, fixed income and need more to live on, or need a large amount of cash for an unexpected expense. This tool allows the senior citizen to get the funds they need, without having to lose their home, go into debt, or take on payments that are unmanageable.

Quite notably, the reverse mortgage has become very popular, and during 2004, a record 37,829 HECM (Home Equity Conversion Mortgage) reverse mortgage loans were originated, over twice the number of HECM reverse mortgage loans originated during 2003.

Before the idea of reverse mortgages came into being, a senior citizen had few options for getting cash out of their home. They could either sell the home and move, or take out a conventional mortgage against the home and have to make monthly payments. The reverse mortgage loan changed all that. A reverse mortgage does not have to be paid back until you die, sell your home, or move out of your home permanently, but it still gives you the benefit of cash when you need it. If you die, the loan is paid back from your estate; however, your estate will not owe more than the home’s value.

A reverse mortgage takes your home equity and lets you leverage it by giving loan advances to you, paying all loan costs associated with the loan, and providing the leftover equity at the end of the loan to you or your heirs.

If you have an existing mortgage, you may still qualify for a reverse mortgage based on the amount of equity you have. It is not necessary to own the home free and clear to qualify for a reverse mortgage.

After you take out a reverse mortgage, you continue to own and live in your home, and still must meet your obligations such as property taxes, insurance, and maintenance.