In its simplest terms, a reverse mortgage is:
- a mortgage available only to seniors 62 and older
- a financial tool that provides access to a significant portion of equity in a senior's home (based on age)
- a mortgage that does not require monthly mortgage payments
- a mortgage for which credit and income are not qualifying factors
Other key features of a reverse mortgage are:
- just like all mortgages, ownership remains with the seniors; lenders never own the home
- upon death of last borrower, heirs or estate take title and, usually, sell the home and pay off mortgage
- reverse mortgage borrowers can never be forced to leave their homes
- vast majority are adjustable rate loans, but attractive new fixed rate is appropriate for some (but not all)
Proceeds (accessible equity) can be used in one of three ways or any combination:
- as a lump sum at closing (normally not recommended for reasons we must explain)
- as a guaranteed monthly payment for life or some shorter period
- left in a growing line of credit to be easily accessed whenever needed
- current liens must be paid off at closing, and their total must be less than available proceeds
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