🏠 What Is a Reverse Mortgage in Real Estate?
A reverse mortgage is a special type of home loan that allows senior homeowners (typically age 62 or older) to convert part of their home equity into cash — without selling or making monthly mortgage payments. The loan is repaid when the homeowner sells, moves, or passes away.
💡 How a Reverse Mortgage Works
Unlike a fixed-rate mortgage or adjustable-rate mortgage, a reverse mortgage doesn’t require monthly payments. Instead, interest accrues over time and is repaid later — usually when the borrower sells the home or it becomes part of an estate.
Most reverse mortgages in the U.S. are called Home Equity Conversion Mortgages (HECMs) and are insured by the Federal Housing Administration (FHA).
✅ Who Qualifies for a Reverse Mortgage?
- The homeowner must be 62 years or older.
- The home must be their primary residence.
- There must be significant equity built up in the property.
- The homeowner must stay current on property taxes, insurance, and maintenance.
📊 Benefits and Considerations
Benefits: Homeowners can access cash for retirement, medical bills, or living expenses while staying in their home. No monthly mortgage payment is required as long as loan conditions are met.
Considerations: Because the loan balance grows over time, a reverse mortgage reduces home equity. It can also impact inheritance and future property sales.
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❓ Frequently Asked Questions
Can you lose your home with a reverse mortgage?
Yes, if you fail to pay property taxes, insurance, or maintain the home, the lender may call the loan due. However, as long as conditions are met, you can stay in your home indefinitely.
What happens when the homeowner passes away?
When the borrower passes away, the loan becomes due. Heirs can repay the balance, refinance the home, or sell the property to settle the loan.
Do reverse mortgages affect Social Security or Medicare?
No, proceeds from a reverse mortgage do not affect Social Security or Medicare benefits, but they may impact Medicaid eligibility in certain situations.