What Is a Reverse Mortgage and How Can You Qualify?


You have spent many years putting money into your mortgage, now you can get some of it back with a reverse mortgage. You can consider a reverse mortgage if you are 62 or older and need some of the money you’ve put in.

This money might be used to supplement your income for everyday spending or it might be for specifics like healthcare expenses. A reverse mortgage helps you to turn part of your home equity into cash without having to sell your home.  


But take your time: It can be challenging to get a reverse mortgage and it might not be right for you. A reverse mortgage will eat up your home’s equity, which means you and your heirs have fewer assets. Up next we’re going to tell you what you need to know about reverse mortgages. 


What Is a Reverse Mortgage and How Can You Qualify?
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How Do Reverse Mortgages Work

When you get a mortgage, you must pay the lender. When you get a reverse mortgage, the lender pays you. Reverse mortgages take some of your home’s equity and turn it into payments to you – a kind of advance on your home equity. 


Generally, the money that you get is tax-free. In general, for as long as you live in your house, you don’t have to pay back the rent. You, your partner, or your family will pay back the loan if you die, sell your home or move out. This also means selling your house to get money to repay the loan.

There are three types of reverse mortgages. 

  • One purpose reverse mortgages – provided by several state and local government departments, as well as non-profits.
  • Proprietary reverse mortgages – private loans.
  • Federally-insured reverse mortgages, commonly known as Home Equity Conversion Mortgages (HECMs).

You will keep the title to your house. However, instead of paying monthly mortgage payments, you advance on some of your home equity. Usually the money you receive is not taxed, so your social security or Medicare payments are also not affected by that.

What to Consider When Looking for a Reverse Mortgage

If you are thinking of getting a reverse mortgage, shop around. Decide which mortgage forms could be the right one for you. It may depend on what you plan to use the money from the reverse plan for.  

Compare the different lenders’ options, terms, and fees. Learn about reverse mortgages as much as you can before talking to an adviser or lender. And ask more questions to ensure a reverse mortgage will work for you – and that you get the right kind for you.

Reverse Mortgage Eligibility

The basic requirements for qualifying for a reverse mortgage loan include several factors like the youngest borrower on title must be at least 62 years of age, the applicants must live at the home as their primary residence, and have sufficient equity in the home. 

Borrowers must also meet the requirements for financial eligibility as set by the United States Department of Housing and Urban Development (HUD). The amount you can access from your home equity is based on a calculation by the Federal Housing Administration ( FHA), which considers the following factors, among others.

  • Youngest householder’s age
  • Present immovable interest
  • Check on new mortgage loans
  • Interest rates
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Ask a counselor or lender to explain the Total Annual Loan Cost (TALC) rates, which will tell you what the annual projected cost of getting a reverse mortgage will be. Regardless of what type of mortgage you are considering, just remember that you will be lowering your home equity if you opt for this choice.