If you’re a homeowner aged 62 or older, you may be considering a reverse mortgage to tap into your home equity. After all, a reverse mortgage can provide much-needed funds for basic living expenses, medical bills, and home repairs—while you remain in the home.
There are several types of reverse mortgages, including the home equity conversion mortgage (HECM) and single-purpose reverse mortgage. The HECM is the most widely used reverse mortgage and offers the most flexibility. On the other hand, a single-purpose reverse mortgage can be a cheaper way to fund a specific expense, such as property taxes or home repairs.
Key Takeaways
- A reverse mortgage is designed for homeowners age 62 or older who want to tap into their home equity to pay for things like basic living expenses and healthcare costs.
- Instead of paying a lender, the lender pays you based on the equity you’ve built in the home. The entire loan balance becomes due if you sell the home, move away, fall behind on property taxes, or die.
- Reverse mortgages are often prohibitively expensive due to the fees and premiums.
- A home equity conversion mortgage (HECM) is the Federal Housing Administration’s reverse mortgage program, representing the bulk of the reverse mortgage market.
- A single-purpose reverse mortgage must be used to pay for a single, lender-approved expense, such as property taxes or necessary home repairs.
What Is a Reverse Mortgage?
Most people who buy a house need a mortgage to…
