Senior Transition
How does a reverse mortgage work, and should I consider one?
By Steve Lockhart
The short answer
A reverse mortgage lets a homeowner 62 or older borrow against the equity in the home without making monthly mortgage payments. The most common type is the Home Equity Conversion Mortgage, or HECM, insured by the federal government.
Full answer
A reverse mortgage lets a homeowner 62 or older borrow against the equity in the home without making monthly mortgage payments. The most common type is the Home Equity Conversion Mortgage, or HECM, insured by the federal government. You receive money as a lump sum, a line of credit, monthly payments, or a combination, and the loan is repaid when you sell the home, move out permanently, or pass away.
The appeal is real for the right person: equity-rich, cash-tight homeowners who want to stay in the home but need more monthly income, with no payment to make. The costs are equally real: origination fees, mortgage insurance premiums, closing costs, servicing fees, and interest that accrues on the entire balance. The loan grows over time while your equity shrinks, and if the balance outgrows the home's value, the federal insurance covers the difference, which is the non-recourse protection built into a HECM.
A reverse mortgage comes with obligations that surprise some people. You must keep paying property taxes and homeowners insurance and maintain the home, or the loan can become due. If you leave the home for more than twelve months, for a long stay in a care facility, for example, the loan may need to be repaid. Borrowers are required to complete an independent counseling session before closing so these realities are on the table before anyone signs.
For many seniors, the honest answer is that the reverse mortgage is one option in a list that includes selling and downsizing, a home equity line of credit, renting out a room, or family help. I do not recommend loans; I recommend decisions. I will walk you through the equity tradeoff with real numbers and connect you with lenders who will lay out the costs line by line.
Go a little deeper
Frequently asked
Questions people often follow up on
What happens if the home sells for less than the reverse mortgage balance?
With a federally insured HECM, the loan is non-recourse. If the sale does not cover the balance, the mortgage insurance pays the difference, and neither you nor your heirs are personally on the hook for more than the home's value.
Can my children keep the home?
Yes. Heirs may repay the loan, typically by refinancing or selling, to keep the home. If they choose to sell, the proceeds pay off the loan and any remaining equity belongs to the estate. It is a conversation worth having with the family early, because it changes everyone's expectations.
The Lockhart Method
The Lockhart Method
Your Home | My Strategy | Proven Results
My strategy: compare the reverse mortgage against the alternatives, selling, downsizing, a HELOC, or family help, with real numbers. I help you see the equity tradeoff clearly, and I connect you with lenders who will lay out the costs honestly.
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