Reverse Mortgages Explained

Learn about reverse mortgages and see how your home equity can be leveraged as a tool in retirement.

What is a Reverse Mortgage?

A reverse mortgage is a powerful tool that enables homeowners to tap into a portion of their home equity and convert it to cash so they can live better in retirement. Also known as a home equity conversion mortgage HECM, this federally insured program is designed to help retirees access the home equity they’ve accumulated through tax-free loan proceeds* without having to sell or vacate their property.

Reverse mortgages are designed for borrowers aged 62 and older. These loans allow homeowners to access the equity they’ve accumulated in their homes and use it to supplement their retirement income. There’s no monthly payment required, so borrowers can significantly increase their cash flow for a higher quality of living in retirement.

There are very few restrictions on how you can use your loan proceeds. Use the money to pay off a car loan or credit card, renovate your home, take care of unexpected expenses—it’s all up to you. If you have an existing mortgage, you can use a reverse mortgage to pay it off to eliminate monthly payments and spend the remaining proceeds however you see fit.

The government launched the reverse mortgage program—known as the home equity conversion mortgage HECM—in 1989 to offer Americans a means to finance their longevity. Since then, there have been over 1,000,000 originated in the USA.

*Reverse mortgage loan proceeds are typically not considered taxable income. However, you should consult a financial advisor and appropriate government agencies for the possible effect they may have on taxes and/or benefits.

 

How a Reverse Mortgage Loan Works

Similar to a traditional mortgage, a reverse mortgage allows you to borrow money using your home as security and is based on the equity you’ve accumulated in your property. But unlike a traditional mortgage, you’re not required to make monthly principal and interest payments.*

Instead, interest on your loan is deferred each month and added to the principal, which increases the loan balance over time. Although you may choose to make voluntary payments, the principal and interest are not due until you sell your home, no longer occupy the property as your permanent residence, or pass away.

*Borrowers are responsible for payment of property taxes, homeowner’s insurance, and any other obligations that might create a lien on the property, and they must maintain the property.

 

How Much Money You Can Get With a Reverse Mortgage

The amount you can borrow increases as interest rates go down, as age goes up, and as property value increases.

Reverse Mortgage Proceeds Based on Age and Appraised Property Value (APV)

Age$100,000
APV
$200,000
APV
$400,000
APV
$600,000
APV
$822,375
APV
62$52,400$104,800$209,600$314,000$430,900
65$54,200$108,400$216,800$325,200$445,700
70$57,600$115,200$230,400$345,600$473,600
75$60,900$121,800$243,600$365,400$500,800
80$64,200$128,400$256,800$385,200$527,900
85$68,500$137,000$274,000$411,000$563,300
90$73,000$146,000$292,000$438,000$600,300

Call us for a personalized estimate.

Reverse Mortgage: FAQs

Have questions? Read through our reverse mortgage FAQs to find the information you’re looking for.
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