## Reverse Mortgages: A Guide for Seniors
### Introduction
A reverse mortgage is a type of loan that allows homeowners 62 and older to access the equity in their homes without having to make monthly mortgage payments. The loan is secured by the home, and the borrower receives monthly payments from the lender, rather than making payments to the lender.
Reverse mortgages can be a helpful way for seniors to supplement their retirement income, pay for medical expenses, or make home improvements. However, it is important to understand the pros and cons of reverse mortgages before you decide if they are right for you.
### How Reverse Mortgages Work
Reverse mortgages are loans that are secured by your home equity. The amount of money you can borrow is based on the value of your home, your age, and your creditworthiness.
There are two main types of reverse mortgages:
* **HECM loans:** Home Equity Conversion Mortgages (HECMs) are the most common type of reverse mortgage. They are insured by the Federal Housing Administration (FHA).
* **Proprietary loans:** Proprietary reverse mortgages are not insured by the FHA. They are offered by private lenders and have different terms and conditions than HECM loans.
With a reverse mortgage, you do not have to make monthly mortgage payments. Instead, you receive monthly payments from the lender. These payments can be used for any purpose, such as paying for living expenses, medical bills, or home repairs.
The loan balance on a reverse mortgage grows over time as interest is added to the loan. When you sell your home or pass away, the loan balance becomes due. If the loan balance is greater than the value of your home, the lender may be able to sell your home to cover the loan balance.
### Pros and Cons of Reverse Mortgages
Reverse mortgages can be a helpful way for seniors to access the equity in their homes. However, it is important to understand the pros and cons of reverse mortgages before you decide if they are right for you.
**Pros:**
* No monthly mortgage payments
* Access to cash to supplement retirement income, pay for medical expenses, or make home improvements
* May help you stay in your home longer
* Tax-free loan proceeds
**Cons:**
* Loan balance grows over time as interest is added to the loan
* May reduce your heirs’ inheritance
* May affect your eligibility for other government benefits
* May be difficult to qualify for if you have a low credit score or a high debt-to-income ratio
### Are Reverse Mortgages Right for You?
Reverse mortgages can be a helpful way for seniors to access the equity in their homes. However, they are not right for everyone.
If you are considering a reverse mortgage, it is important to talk to a financial advisor to discuss your options and make sure that a reverse mortgage is right for you.
### Resources for Reverse Mortgages
* [Federal Housing Administration (FHA): Reverse Mortgages](https://www.hud.gov/topics/reverse_mortgages)
* [National Reverse Mortgage Lenders Association (NRMLA)](https://www.reversemortgage.org/)
* [Consumer Financial Protection Bureau (CFPB): Reverse Mortgages](https://www.consumerfinance.gov/topics/reverse-mortgages/)
### Do Credit Unions Offer Reverse Mortgages?
Yes, many credit unions offer reverse mortgages. Credit unions are not-for-profit financial cooperatives that are owned by their members. They typically offer lower interest rates and fees than banks and other lenders.
To find a credit union that offers reverse mortgages, you can use the National Credit Union Administration’s (NCUA) Credit Union Locator: https://locator.ncua.gov/
### Applying for a Reverse Mortgage
If you are interested in applying for a reverse mortgage, you will need to provide the lender with the following information:
* Your age and date of birth
* Your Social Security number
* Your income and assets
* Your home’s value
* Your current mortgage balance (if any)
The lender will use this information to determine if you are eligible for a reverse mortgage and how much you can borrow.
### Closing on a Reverse Mortgage
Once you have been approved for a reverse mortgage, you will need to close on the loan. This process involves signing a mortgage agreement and a deed of trust. The deed of trust will give the lender a lien on your home.
At closing, you will receive the proceeds from the reverse mortgage loan. These proceeds can be used for any purpose, such as paying for living expenses, medical bills, or home repairs.
### Tips for Getting the Most Out of a Reverse Mortgage
If you are considering a reverse mortgage, here are a few tips to help you get the most out of it:
* **Shop around for the best interest rates and fees.** Not all lenders offer the same terms and conditions on reverse mortgages. It is important to shop around to find the best deal.
* **Get counseling before you apply for a reverse mortgage.** The FHA requires all borrowers to receive counseling before they can apply for a reverse mortgage. This counseling will help you understand the pros and cons of reverse mortgages and make sure that you are making an informed decision.
* **Use the proceeds from your reverse mortgage wisely.** Reverse mortgage proceeds can be used for any purpose. However, it is important to use them wisely so that they will last as long as possible.
* **Monitor your loan balance.** The loan balance on a reverse mortgage grows over time as interest is added to the loan. It is important to monitor your loan balance so that you can make sure that it does not exceed the value of your home.
Reverse mortgages can be a helpful way for seniors to access the equity in their homes. However, it is important to understand the pros and cons of reverse mortgages before you decide if they are right for you. If you are considering a reverse mortgage, it is important to talk to a financial advisor to discuss your options and make sure that a reverse mortgage is right for you.