A reverse mortgage is a type of home loan available to homeowners, typically aged 60 or 62 and older, that allows them to borrow money against the equity in their home without having to make monthly mortgage payments. The loan is repaid when the homeowner sells the home, permanently moves out, or dies. Interest and fees are added to the loan balance each month, causing the amount owed to increase over time rather than decrease. Homeowners still retain ownership and must pay property taxes, insurance, and maintenance costs. Importantly, the amount owed cannot exceed the home's value at the time the loan is repaid, protecting borrowers or their heirs from owing more than the home is worth.

How a Reverse Mortgage Works

• The homeowner borrows money based on their home equity, which can be received as a lump sum, monthly payments, a line of credit, or a combination.
• No monthly mortgage payments are required from the borrower during their lifetime in the home.
• Interest and fees accumulate and are added to the loan balance each month, growing the total owed.
• The loan is repaid by selling the home or when the last borrower moves out or passes away.
• Homeowners keep the title and remain responsible for property taxes, insurance, and upkeep.
• Reverse mortgages are non-recourse loans, meaning repayment cannot exceed the home's value when repaid.

Eligibility and Types

• Generally, borrowers must be at least 60 or 62 years old.
• The home must be the borrower’s primary residence.
• Eligible property types include single-family homes and certain condos.
• The most common reverse mortgage in the U.S. is the Home Equity Conversion Mortgage (HECM).

Reverse mortgages are designed to provide older homeowners access to their home equity as tax-free income while allowing them to remain in their home without monthly loan payments. However, the loan balance grows over time and reduces the equity left in the home, so it is important to consider the costs and implications carefully before proceeding.