What is a Reverse Mortgage?
Everything you need to know about accessing your home equity in retirement — without selling your home or making monthly payments.
A reverse mortgage is a home loan that allows homeowners aged 62 or older to convert a portion of their home equity into tax-free cash — without selling their home or making monthly mortgage payments.
Unlike a traditional mortgage where you make payments to a lender to build equity over time, a reverse mortgage works in reverse: the lender pays you. The loan balance grows over time as interest accrues, and repayment is deferred until you permanently leave the home, sell it, or pass away.
Reverse Mortgage Eligibility Requirements: Do you qualify?
How Does a Reverse Mortgage Work?
Understanding the mechanics of a reverse mortgage helps you make a confident, informed decision. Here's a plain-English breakdown of how these loans operate.
Accessing your home equity:
When you take out a reverse mortgage, the lender calculates how much of your home's equity you can access. This figure — called the Principal Limit — is based on three factors: your age (or the youngest borrower's age), the home's appraised value (up to the FHA lending limit), and the current interest rate.
Generally, the older you are and the more equity you hold, the more funds become available to you.
What happens to the loan balance?
Unlike a traditional home loan where your balance decreases with each payment, a reverse mortgage balance grows over time. Interest accrues monthly on any outstanding balance. This "negative amortization" is the defining characteristic of a reverse mortgage and is perfectly legal and common.
When does repayment happen?
The reverse mortgage becomes due and payable when one of these "maturity events" occurs:
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The last surviving borrower passes away
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The borrower permanently moves out (e.g., into a care facility for 12+ consecutive months)
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The borrower sells the home
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The borrower fails to pay property taxes, insurance, or maintain the home
Heirs typically have 6–12 months to repay the loan — usually by selling the home. Any remaining equity after repayment passes to the estate.
Types Of Reverse Mortgage: Choose the right product
Not all reverse mortgages are the same. There are three main types, each designed for different situations and financial goals.
Reverse Mortgage Disbursement Options
Reverse Mortgage Pros & Cons
Reverse Mortgage Closing Costs
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