Seniors may be able to access up to $600k¹ of home equity while living in their homes

A reverse mortgage allows you to convert home equity into cash without selling your home. Many retirees have untapped wealth in their homes that could be used to improve their retirement. The U.S. government designed reverse mortgages to allow homeowners to access their home equity without monthly debt payments, enabling them to stay in their homes long term.

Challenges of Traditional Home Loans for Retirees

Traditional mortgages and home equity lines of credit may not be ideal:

  • Income and credit requirements make qualifying challenging

  • Mandatory monthly payments strain fixed incomes

Reverse mortgages have several advantages:

  • Easier credit qualifications – there is no minimum credit score and income requirements are flexible³

  • No monthly mortgage payments – the loan does not need to be repaid until you move or pass away²

How Can a Reverse Mortgage Help?

Eliminate your mortgage

Pay off your existing mortgage to reduce monthly expenses and improve your financial flexibility

Pay off credit cards

Swap high-interest debt for a lower-interest reverse mortgage with no monthly debt payments required

Pay medical expenses

Cover ongoing medical costs or pay for long-term care without added financial stress

Make home repairs

Fund home improvements to ensure that you can continue living in your home comfortably, long term

Buy a new home

Get a reverse mortgage instead of buying your home with all cash, saving you money to use elsewhere

Replace lost income

Replace social security, pension, or salary income lost due to the death of a spouse or divorce

How Do Reverse Mortgages Work?

With traditional mortgages, you pay the lender and build up home equity. With reverse mortgages, the lender pays you, reducing your equity over time. While residing in the home, no monthly debt payments are due. Loan interest accumulates monthly and is added to the loan balance. Loan repayment is due when borrowers move out or pass away, but after settling the loan, any remaining home equity goes to the borrower or their heirs.

Reverse Mortgage Payment Options, Explained

  • First, your lender sets your loan amount based on your age, home value, mortgage balance, and other factors

  • Next, part or all of your loan is used to fully pay down any existing debt on your home

  • Finally, any amount of the loan left over after paying off your home loan debt can be used however you want

  • Depending on your lender, these "excess funds" may be available in a lump sum, line of credit, or monthly payments

Top Reverse Mortgage Myths

Myth 1: "The Lender Can Take Your Home"

The Truth: With a reverse mortgage, you retain the title to your home. The lender does not, at any point, own your home as long as you comply with the loan terms, which primarily include living in the home as your primary residence, paying property taxes and homeowner's insurance, and maintaining the condition of your home.

Myth 2: "Reverse Mortgages Are Only for the Desperate"

The Truth: While it's true that reverse mortgages can provide a financial lifeline for some, they are also a strategic financial planning tool for others. Many savvy homeowners use a reverse mortgage to diversify their income streams, delay Social Security benefits, pay for long-term care insurance, and more.

Myth 3: "There Are Hidden Fees and Excessive Costs"

The Truth: Just like with any mortgage, there are costs involved in taking out a reverse mortgage. However, they are regulated and sometimes include insurance premiums to protect both you and the lender, along with standard closing costs. These fees must be transparent and explicitly outlined by the lender before any agreement is signed.

Myth 5: "Reverse Mortgages Can Negatively Impact Your Heirs"

The Truth: A common worry is that taking out a reverse mortgage will mean leaving a financial burden on one's heirs. In fact, reverse mortgages are non-recourse loans. This means if the loan balance exceeds the value of the home when the loan is due, neither you nor your heirs are personally liable.

Myth 5: "Reverse Mortgages Are Complicated and Confusing"

The Truth: Reverse mortgages have evolved over the years, with regulations in place to make them more transparent and understandable. HUD-approved counseling is a required step to ensure you are fully informed about the process and implications, arming you with knowledge to make a confident decision.

Myth 6: "If My Spouse Passes or Moves Out, I May Be Forced to Leave"

The Truth: Amendments to reverse mortgage policies protect non-borrowing spouses, enabling them to remain in the home under specific conditions even after the borrowing spouse has passed away or moved to a care facility. Always ensure both spouses are part of the loan agreement where possible, and stay abreast of the current federal guidelines for the most comprehensive protection.

Is a Reverse Mortgage Right for You?

Reverse mortgages suit those:

  • Over age 62 with significant home equity

  • Concerned about retirement affordability

  • Preferring current funds over leaving a larger inheritance

  • Wanting to stay in their homes long term

Reverse mortgages may not be ideal for those:

  • Feeling confident about retirement affordability

  • Planning to move soon; loan costs may outweigh the benefits

  • Preferring to leave the maximum amount of home equity to heirs

  • Able to afford the monthly payments associated with alternatives (e.g., HELOC, cash-out refi, etc.)

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1. The potential to access up to $600k in home equity is an example based on a borrower over the age of 85 with a home valued at over $1,089,300. Actual amounts vary based on individual circumstances, including age, home value, interest rates, and other factors.

2. Homeowners must remain current on property taxes, homeowner's insurance, and maintain the home in accordance with FHA requirements to retain ownership and not risk foreclosure.

3. Loan approval is subject to individual eligibility, age, property value, and other factors. A financial assessment is conducted to ensure borrowers’ ability to meet their obligations under the loan agreement including property taxes, insurance, and home maintenance. ‘Set-asides’ may be allocated from loan proceeds to help cover these obligations.

4. Not tax advice. Consult a tax professional.


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