What Is a Reverse Mortgage?
A reverse mortgage allows an eligible older homeowner to borrow against home equity without making required monthly principal-and-interest payments. The most common type is the Home Equity Conversion Mortgage, or HECM, which is insured by the Federal Housing Administration.
For a HECM, at least one eligible borrower generally must meet the program’s minimum age requirement, occupy the home as a principal residence, complete approved counseling, and satisfy financial and property requirements.
The Balance and Homeowner Obligations
Interest, mortgage insurance, and financed charges are added to the loan balance over time, so the amount owed generally grows while available equity declines. The homeowner retains title and must continue paying property taxes, homeowners insurance, applicable association charges, and maintenance costs.
Failure to meet those obligations can place the loan in default.
When the Loan Becomes Due
The loan generally becomes due when the last eligible borrower dies, sells the home, permanently moves away, or otherwise stops meeting principal-residence requirements. Heirs may have options to repay the balance, sell the property, or surrender it according to the loan terms and applicable rules.
Reverse mortgages affect equity, estate plans, public benefits, and household finances. Required counseling is an important safeguard, and borrowers should also consider discussing the decision with trusted legal, tax, and financial advisers.