Reverse Mortgage FAQs: Everything You Need to Know

Reverse mortgages are a valuable financial tool for seniors looking to access home equity while continuing to live in their homes. However, many homeowners have questions about how they work, who qualifies, and the benefits and risks involved. Here are the most frequently asked questions about reverse mortgages.
1. What is a Reverse Mortgage?
A reverse mortgage is a loan that allows homeowners aged 62 and older to convert a portion of their home equity into cash. Unlike a traditional mortgage, borrowers do not make monthly payments; instead, the loan balance increases over time and is repaid when the borrower moves out, sells the home, or passes away.
2. Who Qualifies for a Reverse Mortgage?
To qualify for a reverse mortgage, homeowners must:
- Be at least 62 years old.
- Own the home as their primary residence.
- Have sufficient home equity.
- Maintain the property, pay property taxes, and keep homeowners insurance active.
- Complete HUD-approved counseling.
3. How Do Reverse Mortgage Payments Work?
Borrowers can receive their funds in several ways:
- Lump Sum – A one-time payout.
- Monthly Payments – Steady income for a set period or for life.
- Line of Credit – Withdraw funds as needed, with interest only applied to the amount used.
- Combination – A mix of the above options.
4. What Costs Are Associated with a Reverse Mortgage?
Common reverse mortgage costs include:
- Origination Fees – Charged by lenders for processing the loan.
- Mortgage Insurance Premiums (MIP) – Required for FHA-backed HECM loans.
- Appraisal & Closing Costs – Fees for home valuation and legal paperwork.
- Servicing Fees – Charged by lenders to manage the loan.
5. How is a Reverse Mortgage Repaid?
A reverse mortgage becomes due when:
- The homeowner sells the home.
- The borrower moves out permanently.
- The borrower passes away. Heirs have the option to repay the loan and keep the home or sell the home and use the proceeds to cover the loan balance.
6. Will My Heirs Inherit Debt?
No, reverse mortgages are non-recourse loans, meaning heirs will never owe more than the home’s appraised value. If the loan balance exceeds the home value, the FHA insurance covers the difference.
7. Can I Lose My Home with a Reverse Mortgage?
Borrowers must meet loan obligations, including paying property taxes, homeowners insurance, and maintenance. Failure to do so could result in loan default and foreclosure.
8. How Does a Reverse Mortgage Affect Social Security & Medicare?
Reverse mortgage proceeds do not impact Social Security or Medicare benefits. However, needs-based programs like Medicaid and Supplemental Security Income (SSI) may be affected.
9. What Happens If I Want to Sell My Home?
You can sell your home at any time. The loan balance must be repaid from the sale proceeds, and any remaining equity belongs to you.
10. How Do I Apply for a Reverse Mortgage?
The application process includes:
- Consulting a Reverse Mortgage Lender – Discuss eligibility and options.
- Attending HUD-Approved Counseling – Required to ensure borrowers understand the loan.
- Home Appraisal & Loan Processing – Determines home value and loan amount.
- Loan Closing & Disbursement – Sign paperwork and receive funds.
Is a Reverse Mortgage Right for You?
A reverse mortgage can provide financial security and flexibility for retirees. However, it’s essential to weigh the benefits and responsibilities before deciding.
Get Expert Guidance on Reverse Mortgages
For more information or to explore your reverse mortgage options, contact EstaR Mortgage at 510-463-1003.
Disclaimer: Reverse mortgages have benefits and risks. Consult a financial professional to determine if this loan is suitable for your needs.