What is a Reverse Mortgage?

Seniors may hear about a reverse mortgage and wonder “is this for me?”.  As someone who recently turned 65, I know I have.  I’ve seen it online and on TV commercials.  One of my kids even suggested I look into it recently.

My name is Bob, and I wanted to start writing about what I’ve learned about a reverse mortgage so that you can get a better understanding if this is for you.

I worked my entire life for one company and retired just before I turned 60.  My kids are out of the house, but my wife and I kept our house because we like to have room for the kids and grandkids to visit.  We like to host holidays with our family, and we like to play pinochle with our friends.  But having a three bedroom house with two people at times feels like too much.  That’s why I started investigating a reverse mortgage in the first place.

A reverse mortgage uses the equity in my home, and instead of me making mortgage payments each month, the bank actually pays me.  There is some really nice flexibility in the payment options too.  

What I learned is that a reverse mortgage is really just a loan.  It’s still a mortgage.  The difference is the term “reverse” that had me a little twisted at first.  Once I learned some of the details, it definitely made more sense to me.

The foundation of a reverse mortgage is home equity.  Since I own my home, I have a lot of my net worth tied up in the value of the house.  Because I don’t want to sell it and downsize, a reverse mortgage lets me leverage this equity and receive a payment each month.  

It’s important to know that you would need to own your home outright or have considerable equity (you are close to paying off your current mortgage) to qualify for a reverse mortgage.

The other factor is age.  To qualify for a reverse mortgage, homeowners need to be at least 62 years old.  

If this sounds like you, I hope you’ll keep reading my blog posts.  There is a lot more information that I’d like to share about how these work, things you will want to consider, and the options if you want to move forward.