A reverse mortgage is a loan available to seniors over the age of 62 which allows them to convert equity in their home into cash. These loans were created to give seniors access to cash for expenses such as home improvements, unexpected medical costs, and in-home care by utilizing the accumulated equity in their homes.
This type of loan is called a reverse mortgage because instead of the borrower making monthly payments to their lender as they would with a traditional mortgage there is no monthly payment made. You obtain your accessible proceeds monthly or as you choose. Unlike a traditional home equity loan or second mortgage, a reverse mortgage does not have to be repaid until the borrower no longer occupies the home as their primary residence.
The most common reverse mortgage is the Home Equity Conversion Mortgage (HECM) which is insured by the FHA. An alternative option is the Proprietary Reverse Mortgage which is not backed by the federal government. These Proprietary Reverse Mortgages are perfect for higher value homes and for Seniors that want to set up an access line of funds from their home equity.