What is a reverse mortgage?
The most popular reverse mortgage program in America, the Home Equity Conversion Mortgage (HECM) is insured by the Federal Housing Administration of the U.S. Government. A reverse mortgage enables older homeowners (62 or older) to convert a large part of the equity in their homes into tax-free cash without having to sell the home, give up title, or take on a new monthly mortgage payment. This provides homeowners substantially greater resources and flexibility to manage retirement finances and retirement planning.
For most people, a large portion of their wealth is the built up equity in their homes. Until the advent of reverse mortgages, there were only two ways for a homeowner to reach that valuable equity. You could sell and move, an option that most people don’t like. Or, if you qualified for a loan, you could borrow against your home with an ordinary loan. But, that involves making mandatory monthly payments to the lender – a major risk for people of retirement age and an option most people find unattractive.
A reverse mortgage is a great way for you to turn an idle asset – your home – into a valuable financial tool that you can use today and in the future – without taking on new payment risks. With a reverse mortgage you don’t pay, you receive. A line of credit is established for you to draw upon at times and amounts of your choosing. Or, you can arrange for a monthly income supplement – or both.
It’s called a reverse mortgage because the flow of payments is reversed from an ordinary mortgage. Cash is advanced to you to use as you see fit. Repayment is not required for as long as you live in your home – no matter how long that may be!
Reverse mortgages have provided new financial opportunities to nearly a million American households. Perhaps a reverse mortgage will do the same for you too!