A senior who takes out a reverse mortgage still holds the title and ownership rights to the property. Like other types of home loans, a reverse mortgage requires the loan to be paid off once the owners die or when they decide to sell the home. While home equity is used to fund the loan distribution, and no payment is owed on the property, taxes and fees continue to add up.

Reverse mortgages are ideal for seniors who want to free up funds to pay other bills. This type of mortgage can provide financial stability during retirement and make it possible to fund long-term care.

Reverse Mortgage Eligibility

Reverse mortgages are only available to seniors aged 62 and older. Other qualifications include:

  • Individuals must receive counseling through a HUD-approved reverse mortgage agency
  • Homeowners must not be delinquent on any federal debt, including student loans and income taxes
  • The home must be owned outright or have a low mortgage balance
  • A portion of the reverse mortgage must go to taxes, insurance, maintenance and repair

How Reverse Mortgages Work

Reverse mortgage payouts are available through a line of credit, a monthly payout or a lump-sum payment. A line of credit works the same way as a secured credit card. The homeowner only pays on the amount they borrow. A monthly payout provides a fixed payment each month for a set number of years. A lump-sum payout allows seniors to withdraw all the funds from their equity at once. The amount available with a lump-sum payment is typically a lower amount than other options.

For the duration of the reverse mortgage, the home must be used as the owner’s primary residence, and all property taxes and homeowner’s insurance policies must be kept up-to-date and paid in full. All maintenance must be performed on the property, and it must be kept in good condition. If not, the lender may withhold some of the loan proceeds until repairs have been made. 

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