What Is A Reverse Mortgage?

Reverse mortgage
If you are 62 or older, a reverse mortgage may assist with living expenses.

For many homeowners, their home is their biggest asset. As you age, you might find yourself wondering how to leverage that built-up equity to improve your retirement or financial situation. This is where a reverse mortgage come in.

It is believed that the first reverse mortgage was written in 1961. With this said, they became more widely known when President Ronald Reagan signed the Housing and Community Development Act into law in 1988. Below we discuss what a reverse mortgage is and some of their features.

What is a reverse mortgage?

Unlike traditional mortgages where you make monthly payments, a reverse mortgage allows you to access the equity in your home without having to sell. You receive funds from the lender, which can be distributed as a lump sum, monthly payments, or a line of credit. Importantly, you don’t have to repay the loan until you move out of the home, sell it, or pass away.

Key features of a reverse mortgage

  • Age Requirement: Typically available to homeowners 62 years or older.
  • No Monthly Payments: You don’t make monthly payments on the loan itself, but you are still responsible for property taxes, homeowners insurance, and maintaining the property.
  • Loan Repayment: The loan becomes due when you leave the house (by selling, moving to long-term care, or passing away). At that point, the heirs or the estate can either sell the house to repay the loan or potentially refinance it.
  • Interest Accrues: Interest accrues on the outstanding loan balance, meaning your debt grows over time.

Important considerations for a reverse mortgage

  • Reduces Home Equity: As the loan balance increases with interest, your ownership stake in your home decreases.
  • Costs and Fees: Reverse mortgages come with origination fees, closing costs, and mortgage insurance premiums that can add up significantly.
  • Debt Inheritance: Heirs are not personally liable for any remaining loan balance beyond the value of the home.

Is a reverse mortgage right for you

Reverse mortgages can be a helpful tool for seniors seeking to access their home equity, but they are not without risks. Carefully consider these factors before deciding:

  • Long-term financial goals: Will the income from the reverse mortgage be enough to cover your needs without jeopardizing your future financial security?
  • Alternatives: Explore other options like downsizing your home or tapping into retirement savings.
  • Consult a financial advisor: Discuss your financial situation and goals to determine if a reverse mortgage aligns with your needs.
  • Shop around: Compare different lenders and loan options to find the best terms and rates.


Reverse mortgages can be a valuable tool for homeowners in the right circumstances. However, it’s crucial to carefully consider the pros and cons, including the impact on your long-term financial picture and potential implications for your heirs. Consulting a financial advisor and researching different lenders is essential before making any decisions.

Are you thinking about buying or selling a home in the South Florida area? We can help! Contact Natasha at Live South Florida Realty, Inc. today! Also, be sure to download the free Florida Home Search app for your smartphone or tablet.

By natasha moore

REALTOR® with Live South Florida Realty, Inc.