Reverse Mortgage Loans

What are Reverse Mortgage Loans?

A reverse mortgage is a type of loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their home into cash.


Reverse mortgage loans are the type of loans meant for people who wish to buy or refinance a home and are aged at 62 years or more. These loans lend older people an opportunity to transform a piece of equity belonging to them into cash.


The main aim behind reverse mortgage loan formation was to support the seniors who are left with less income or have meager income resources. With a reverse mortgage plan the older people can utilize their collected money in homes and could help manage their daily expenses and health needs that are financial in nature.


The loan is recognized as ‘reverse mortgage loan’ only because in this type of loan the lender pays the monthly amount to borrower which is quite the opposite from common mortgage plans, where the opposite happens i.e. the borrower makes monthly mortgage payments to the lender.


Generally, the borrower is not responsible for paying back the loan until they no longer occupy the home as their principal residence or sell the property. The borrower is expected to remain up-to-date with property taxes and homeowner’s insurance, maintain the property, and comply with all other loan terms.

What are the advantages of getting a reverse Mortgage Loans?

Reverse Mortgage Advantages


The biggest merit of reverse mortgage loans is that a person can end up his/her monthly traditional loan payments and can utilize equity in the home while residing or possessing the residential property. In a genuine way, reverse mortgage is an ideal plan to enhance your financial strength during or after retirement.


There are several other advantages of buying reverse mortgage loans. These are:


  • Reverse mortgage loan is an intelligent choice to build up your recent finances: This type of plan ensures an individual’s security by enabling him/her to reside in one’s home with choice and requires no monthly mortgage payments.
  • Reverse mortgages are highly flexible and suit the needs of unique borrowers.
  • If you own a reverse mortgage plan, it is assured that you would never bear more than your residential property’s value due to the non-recourse feature
  • Reverse mortgages have fewer restrictions and loan proceeds are tax-free. Like all mortgage loans, the borrower must continue to pay property taxes and homeowner’s insurance.
  • Provide home or residential ownership
  • HECM Reverse mortgage plans are insured by federal governments.
  • This type of plan helps in the preservation of home equities.

Who qualifies for a Reverse Mortgage Loan?

The first and foremost requirement that grant eligibility for reverse mortgage loans is the age i.e. 62 years or older or the individual must possess a home equity. It isn’t required for the borrower to own the home free and clear, but they must have enough equity to satisfy any existing liens with the reverse mortgage proceeds at closing.


Often there are the cases, where reverse mortgages are done on single family units. However, other forms of properties such as FHA-approved condominiums can also qualify. Whatever might be the property form, it should be present and situated in the home. This implies that an individual is not allowed to buy reverse mortgage loan for a commercial piece, rental or vacation house.


At the time of reverse mortgage completion, the borrower is expected to be a permanent resident of the home till the loan balance is fulfilled.


Few reverse mortgages come with credit needs but not in all cases. In both the situations i.e. where there is presence or absence of credit requirements, an individual in either way will find it comfortable to qualify for reverse mortgage loan as compared to the traditional loans.


Disclosure: “These materials are not from HUD or FHA and were not approved by HUD or a government agency.” (HUD Mortgagee Letter 2014-10)