A reverse mortgage is a loan that allows homeowners aged 62 or older to borrow against their home equity.
What You Need to Know About Reverse Mortgages
A reverse mortgage is a loan that uses your home equity as the source of funds. It is only available to homeowners who are 62 or older. It is designed for those who have paid off most or all of their mortgage.
The bank lends you money based on what you have already paid on your home. The bank charges interest on that amount.
One appeal of a reverse mortgage is that you make no monthly payments to the lender. You do not pay the interest until you sell your home.
If you die before selling your home, your heirs face two options. They can pay off the full reverse mortgage balance, including accumulated interest. Or they can surrender the home to the bank.
A reverse mortgage may seem like a helpful cash-flow option in retirement. However, these loans put seniors and their heirs at financial risk.