What Is a Reverse Mortgage?

A reverse mortgage is a loan that allows homeowners who are 62 or older to borrow against a portion of the equity in their home.

A reverse mortgage works differently than a traditional mortgage. Instead of making payments to your lender, the lender makes payments to you.

The loan first pays off your existing mortgage, if you have one. You can then use the remaining funds for any purpose.

You must continue to pay property taxes, homeowners insurance, and maintain the home.

To Qualify for a Reverse Mortgage

• You must be at least 62 years of age.
• The home must be your primary residence, not a second home or vacation property.
• For a Home Equity Conversion Mortgage (HECM), HUD requires:
  • A reverse mortgage counseling session with a HUD-approved counselor.
  • A financial assessment to confirm you can meet ongoing loan obligations.
• You cannot owe federal debt, such as unpaid taxes or defaulted federal student loans.
• The property must meet required HUD property standards.

Important Cost and Financial Impact Information

A reverse mortgage can help some homeowners, but it has long-term financial effects that must be understood.

Interest, Fees, and Loan Balance Growth

You do not make monthly mortgage payments as long as you live in the home and meet loan requirements.
However, interest, mortgage insurance premiums (if applicable), and other fees are added to the loan balance over time.

Because of this, the amount owed increases over the life of the loan and may reduce your home equity.

Total Finance Charges and Cost of Credit

Under the Truth in Lending Act (Regulation Z), lenders must disclose the total cost of credit, including fees and charges that may not be considered traditional finance charges.
This allows you to compare estimated costs before closing.

Loan Maturity and Repayment

A reverse mortgage becomes due and payable when:

• You sell the home
• You permanently move out
• You fail to meet loan obligations, such as paying property taxes or insurance
• The last surviving borrower dies

At that time, the full loan balance, including interest and fees, must be repaid.

Heirs may:

• Repay the loan and keep the home
• Sell the home to satisfy the debt
• Allow the lender to recover the home

With federally insured HECM loans, neither you nor your heirs are personally liable for any balance that exceeds the home’s value at repayment.

Why Counseling Matters

HUD-required counseling helps ensure you understand:

• How a reverse mortgage works
• How the loan balance grows over time
• How it affects home equity and long-term planning
• Alternatives to a reverse mortgage
• Your responsibilities to keep the home

Need More Details?

To explore whether a reverse mortgage is right for you, contact your licensed Approved Mortgage Solutions mortgage broker at the phone number below, or use the Contact Us form and we will reach out to you.