What is a Reverse Mortgage?
A Reverse Mortgage, or Home Equity Conversion Mortgage (HECM), is a loan that allows borrower(s) age 62 and older to purchase a new home, or access their equity in their existing one, without the burden of monthly mortgage payments
Why Would I Get a Reverse Mortgage?
The major benefit of a reverse mortgage is the ability to buy a home or access cash without having to make a monthly payment, alleviating borrowers’ financial burden. They are used for many purposes, including:
- Creating additional income or a financial safety net of available funds
- Financial planning to delay drawing Social Security
- Downsizing or Upsizing
- Relocations to be closer to family members or medical facilities
- Purchasing a second home or rental property
- Gifting funds to family members
- Rescuing family members in financial distress
How is a Reverse Mortgage Repaid?
Instead of making monthly payments as you would in a traditional mortgage, a reverse mortgage is paid in one lump sum at the end of the loan. This typically occurs:
- When the loan term ends
- When the borrow is deceased
- If the borrower no longer lives in the property as their primary residence
- If the borrower does not uphold the terms of the loan (adequately maintaining the property and paying taxes and insurance)