What is a reverse mortgage?
A reverse mortgage is a special type of loan that allows homeowners 62 and older to borrow against the equity in their homes. It is called “reverse” because you receive money from the lender, instead of making payments to the lender. The money you receive, and the interest charged on the loan, increase the balance of your loan each month. Over time, the equity you have in your home decreases as the amount you owe increases.
When you take out a reverse mortgage loan, you can receive your money as a line of credit available when you need it, in regular monthly installments, or up-front as a lump sum. You do not have to pay back the loan as long as you continue to live in the home, maintain your home, and stay current on expenses such as homeowner’s insurance and property taxes. If you move or die, the loan becomes due and must be paid off. In most cases the home will need to be sold in order to repay the loan.
Most reverse-mortgage loans are insured by the Federal Housing Administration (FHA). Some lenders may also offer proprietary (non-government insured) reverse mortgages, which are typically designed for homeowners with high home values.
TIP: If you or your parents are considering a reverse mortgage, make sure you get all the facts first:
- Check out the other reverse-mortgage related questions on Ask CFPB.
- Download this helpful consumer guide from the CFPB's Office for Older Americans.
- Talk to a reverse-mortgage counselor. Find a HUD-approved counselor by visiting HUD's counselor search page or calling HUD's housing counselor referral line (1-800-569-4287).