How a Reverse Mortgage Loan Works

With a traditional reverse mortgage loan, borrowers can access their home equity without having to pay principal and interest.* It’s called a “reverse mortgage” because, unlike a traditional loan where the borrower makes payments to the lender, the lender makes payments to the borrower. The loan is repaid when the last borrower or eligible non-borrowing spouse passes away or leaves the house.

The borrower remains the owner of the home and retains title.*

The amount you can borrow depends on your age, property value, and interest rate. The older you are, the more equity you’ll have access to.

The borrower must continue to pay property taxes and homeowner’s insurance, and must keep the house in good repair.

As a non-recourse loan, the borrower will never owe more than the house is worth. If the loan balance exceeds the home’s value, the Federal Housing Administration will cover the difference.

There are different types of reverse mortgages and the funds can be disbursed in a number of ways.

Who Qualifies for a Reverse Mortgage Loan

Traditional reverse mortgages were established in 1989 to help older homeowners age in place. As a government-insured loan, there are several important requirements borrowers must meet to qualify.

You must be at least 62 years old.

You must own your home.

The home must be your primary residence.

Features and Safeguards

The HECM reverse mortgage product has been improved over the years so that it can better meet the needs of older adults. Today, there are important safeguards in place to ensure that it can continue to help consumers for years to come.

You must complete reverse mortgage counseling with an independent counseling agency.

You must undergo a financial assessment to ensure you are able to meet the financial obligations of the loan, which includes the ability to pay your property taxes and homeowners insurance.

If your spouse is younger than 62, they can qualify as an eligible non-borrowing spouse and remain in the home even if you leave or pass away, so long as they continue to meet all loan obligations.*