A reverse mortgage is a loan that is available for senior homeowners age 62 and older that allows them to access a portion of their home’s equity. The loan generally does not become due until the last surviving homeowner permanently moves out of the property or passes away. The funds from a reverse mortgage loan can be used however the borrower chooses.
The U.S Department of Housing and Urban Development states that reverse mortgage loans “are a special type of home loan that lets a homeowner convert the equity in his/her home into cash. They can give older Americans greater financial security to supplement social security, meet unexpected medical expenses, make home improvements, and more.” Because the Federal Housing Administration (FHA) insures the loan, the property must meet specific FHA standards. The borrower must also continue paying required property taxes, homeowner’s and flood insurance and maintain the home according to FHA requirements. It is also a requirement of the loan to meet with a HUD approved reverse mortgage loan counselor. During this meeting, the counselor will explain the benefits and risks of the loan, the borrower’s expectations and answer any questions the borrower may have.