What is a Reverse Mortgage?

A reverse mortgage is a special type of loan meant for older homeowners, typically aged 62 or older, or 55+ in California. It's designed to help them turn a part of their home's value into cash, giving them extra money during retirement. Unlike regular mortgages where you pay the bank each month, with a reverse mortgage, the bank pays you. This is a helpful way for retirees to access the money tied up in their homes without having to sell or leave.
Getting a reverse mortgage is pretty straightforward. Once you're approved, you can choose how you want to get the money: all at once, a little bit each month, a line of credit you can tap into when needed, or a mix of these options. The amount you can get depends on your age, your home's value, and interest rates at the time.
The best part? You don't have to worry about required monthly payments on the loan. Instead, the loan balance goes up over time and gets paid back when you sell the home, move out permanently, or pass away. Whatever equity is left in the home belongs to you or your family. Of course, if you’d like to make payments at any time, you are free to do so.
There are different types of reverse mortgages, but the most common one is called a Home Equity Conversion Mortgage (HECM), backed by the government to protect borrowers. While reverse mortgages can be a helpful way to get extra money in retirement, be advised, you still need to pay your property taxes, insurance, and keep up with home maintenance.
Because reverse mortgages can be complex, it's important to think carefully about whether one is right for you. Consulting with a financial advisor or mortgage specialist (like me) who understands your needs and goals is a smart idea. With the right guidance, a reverse mortgage could be a valuable tool to make your retirement more comfortable and secure. Let's talk!