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What is a Reverse Mortgage?

Reverse mortgages are specifically for senior homeowners, where they can use a portion of their home’s equity as collateral.  Typically the loan does not need to be repaid until the last homeowner moves out of the property or passes away. At this point, the estate has about 6 months to repay the remaining loan balance or sell the home to repay the balance. All of the equity that remains is inherited by the heirs of the estate.


To find out if you are eligible for a HECM reverse mortgage, the Federal Housing Administration (FHA) requires that you, the homeowner, be age 62 or older. If the home is not owned free and clear, all existing liens and mortgages must be able to be satisfied with the new reverse mortgage. Your current mortgage balance can be paid off using the proceeds of a reverse mortgage loan when the loan closes.

Estate Inheritance

In the event that the owner passes away or if the home is no longer the primary residence for over 12 months, the homeowner’s estate can either repay the reverse mortgage balance or list the home for sale.

If there is still equity in the home above the amount of the loan balance, then the remaining equity goes to the estate.

If the sale price of the home is not high enough to pay off the reverse mortgage balance, the lender, not the homeowner, must take the loss. Rest assured that no other assets can be diminished by a reverse mortgage. For example, other property, boats and/or other valuables can NOT be tapped by the lender to pay off the remaining balance of the reverse mortgage.

Loan Limits

The loan amount that you can get typically depends on these factors: age, current home value and interest rates and also any government imposed lending limits. To find out how much you can get, use our Reverse Mortgage Calculator.

Distribution Options

There are many ways to receive your proceeds from a reverse mortgage to best fit your situation.

  • Lump sum – single sum of cash at closing.
  • Tenure – fixed monthly payments for as long as you live in the home.
  • Term – fixed monthly payments for a fixed number of years.
  • Line of Credit – access any amount whenever you need until your max is reached.
  • Any combination of distribution options above.

How is it different from a home equity loan?

With a home equity loan, or a second mortgage, you will have strict requirements for income and credit scores. With traditional loans the homeowner needs to make monthly payments on the loan, but with a reverse mortgage, you will have no income or credit requirements and will be receiving payments from the lender on your equity.

Traditional mortgage loans are due in 15 or 30 years, but with a reverse mortgage the loan is generally not due until the homeowner moves or passes away. Even though a reverse mortgage has no monthly payments, you still own the home and are responsible for the home's property taxes, insurance, and maintenance.