In a reverse mortgage, instead of paying to for your home, you’re getting paid for your home. It is considered a loan, but it does not have to be repaid, except by the proceeds from selling the home.
Older Americans who need the income and aren’t concerned about their heirs getting their house might apply for a reverse mortgage. It is also known as a Home Equity Conversion Mortgage (HECM).
The borrower must remain current on property taxes and homeowner’s insurance, but no mortgage payments are due from the homeowner.
Reverse mortgages are made possible by the FHA (Federal Housing Administration) and the HUD (Housing and Urban Development) program to Americans age 62 and over.
The current limits of a reverse mortgage loan are about $625,000. The program is enacted through a network of certified private reverse mortgage lenders and reverse mortgage counselors.
While there are no strings attached to the income that a person receives from a reverse mortgage, some financial institutions such as insurance companies and broker-dealers are forbidden from using the proceeds of a reverse mortgage to fund some investments and financial products.