## What is a Reverse Mortgage?
**A reverse mortgage is a loan that allows homeowners who are 62 or older to access the equity in their home without having to make monthly mortgage payments.** The loan is secured by the home, and the homeowner continues to own and live in the property.
**Reverse mortgages can be a good option for seniors who need extra money to cover expenses such as medical bills, home repairs, or living expenses.** They can also be used to supplement retirement income.
**There are two main types of reverse mortgages:**
* **Home Equity Conversion Mortgages (HECMs)** are insured by the Federal Housing Administration (FHA).
* **Proprietary reverse mortgages** are not insured by the government.
**HECMs are the most common type of reverse mortgage.** They have lower interest rates and closing costs than proprietary reverse mortgages, but they also have some restrictions. For example, the amount you can borrow is limited to a certain percentage of the home’s value.
**Proprietary reverse mortgages have higher interest rates and closing costs than HECMs, but they have fewer restrictions.** For example, you can borrow more money and you can use the funds for any purpose.
## How Does a Reverse Mortgage Work?
**When you get a reverse mortgage, the lender gives you a lump sum of money or a line of credit.** You can use the money for any purpose, such as paying off other debts, making home repairs, or supplementing your retirement income.
**You do not have to make monthly mortgage payments with a reverse mortgage.** Instead, the interest on the loan is added to the balance of the loan each month. This means that the amount you owe on the loan will increase over time.
**When you sell the home or move out, the loan balance becomes due and payable.** The lender can sell the home to repay the loan, or you can use the proceeds from the sale to pay off the loan.
## Who Qualifies for a Reverse Mortgage?
**To qualify for a reverse mortgage, you must be 62 or older and own your home free and clear.** You must also meet certain financial requirements, such as having a sufficient income to cover the property taxes and insurance.
**If you are considering a reverse mortgage, it is important to talk to a financial advisor to see if it is the right option for you.** A financial advisor can help you understand the risks and benefits of reverse mortgages and can help you choose the right loan for your needs.
## What are the Benefits of a Reverse Mortgage?
**There are several benefits to getting a reverse mortgage, including:**
* **No monthly mortgage payments:** This can free up your cash flow and allow you to live more comfortably in retirement.
* **Access to cash:** You can use the money from a reverse mortgage to pay off other debts, make home repairs, or supplement your retirement income.
* **Tax-free money:** The money you receive from a reverse mortgage is not taxable.
## What are the Risks of a Reverse Mortgage?
**There are also some risks to consider before getting a reverse mortgage, including:**
* **The loan balance can increase over time:** The interest on the loan is added to the balance of the loan each month, which means that the amount you owe on the loan will increase over time.
* **You could lose your home:** If you do not meet the loan obligations, such as paying the property taxes and insurance, the lender could foreclose on the home.
* **You may have to pay a lump sum payment when you sell the home:** When you sell the home or move out, the loan balance becomes due and payable. You can sell the home to repay the loan, or you can use the proceeds from the sale to pay off the loan.
## Is a Reverse Mortgage Right for You?
**A reverse mortgage can be a good option for seniors who need extra money to cover expenses.** However, it is important to understand the risks before getting a reverse mortgage.
**If you are considering a reverse mortgage, talk to a financial advisor to see if it is the right option for you.** A financial advisor can help you understand the risks and benefits of reverse mortgages and can help you choose the right loan for your needs.
## Additional Resources
* [Reverse Mortgages: A Guide for Seniors](https://www.consumerfinance.gov/reverse-mortgages/guide-for-seniors/)
* [Reverse Mortgages: What You Need to Know](https://www.aarp.org/money/credit-loans-debt/info-2019/reverse-mortgage-basics.html)
* [Reverse Mortgages: Pros and Cons](https://www.nerdwallet.com/article/mortgages/reverse-mortgage)