How a Reverse Mortgage Works


Are you uncertain about how a reverse mortgage works? Maybe you have heard people talking about a reverse mortgage, but you might still be wondering how the whole process works.

How a Reverse Mortgage Works

A reverse mortgage is a home equity loan designed for older homeowners and does not involve monthly mortgage payments. Instead of requiring monthly mortgage payments, the existing equity in the home is used to pay the borrower. Reverse mortgage loans will continue to pay the borrower until they move out of their home or pass away.

Reverse mortgages are an excellent way to supplement retirement income. Reverse mortgages are also extremely flexible, allowing borrowers to receive their money as a lump sum, a steady stream of monthly payments, or as a line of credit that borrowers can tap into as they need. Since reverse mortgages are so flexible, they have become a popular and useful tool for seniors planning their retirement.

There are several different types of reverse mortgages, but the most popular one is a federally-insured reverse mortgage known as HECM. These are loans designed for borrowers over the age of 62 and allow them to use their home equity to receive money, all while living in their house.

How can a reverse mortgage help me?

Reverse mortgages are able to help a variety of seniors, and they can be a useful retirement planning tool. Many people who benefit from a reverse mortgage:

  • Want to remain in their home
  • Are able to maintain their home, pay their property taxes, and insurance
  • Want to be able to supplement their existing income
  • Want to eliminate their existing mortgage
  • Want to improve their existing monthly cash flow
  • Can use the money for anything they want

Reverse mortgages are useful for people who wish to have money set aside for a rainy day or for people who may want to pay off debt like medical bills. Reverse mortgages are also great for people who want to make an improvement to their home.

Why might a reverse mortgage not be for me?

While the versatile option of a reverse mortgage is great for many people, reverse mortgages are not for everyone. Reverse mortgages are not a great option for people who:

  • Do not have significant equity built up in their home
  • Do not plan to live in their house for more than 12 months
  • Are not able to pay property taxes, homeowner’s insurance, or keep the home in good condition

How much money can I get from a reverse mortgage?

There are several factors that help determine the amount of money you are able to receive through your reverse mortgage. For the best estimate, use our free Reverse Mortgage Calculator.

These are the key factors that influence the amount of money you will be able to receive through a reverse mortgage:

  • Age (or, if you are married, the age of the youngest spouse) – The older you are, the more money you can receive.
  • Value of the home – The more valuable your house, the more money you can receive.
  • Interest rate – The lower the interest rate, the more money you can receive.
  • Mortgage balance – If you have a mortgage, the lower the balance on the mortgage, the more money you will be able to receive.

How does a reverse mortgage work?

The process to get a reverse mortgage is relatively simple. Below is a simple checklist to help you get started.

  • Find out how much money you can receive from a reverse mortgage with our Reverse Mortgage Calculator.
  • Get a free information kit to learn more and speak with lenders
  • Request a call from a lender and get a proposal
  • Complete required HECM counseling
  • Complete a loan application and appraisal
  • Start receiving your money



Please enter your comment!
Please enter your name here