Reverse Mortgage

A reverse mortgage is a type of loan used by homeowners 62 years old and over to convert the equity in their home into money. The loan doesn't have to be repaid until the owner moves or dies. Heirs can then sell or refinance the property.

The money from a reverse mortgage can be used for any purpose, including healthcare needs, debts, home repairs, and to supplement monthly income. It may also help pay for services through a long term care insurance policy, annuity, or single-premium life/long term care policy.

The amount of money you can get depends on your age, the equity of your home, the type of loan, and current interest rates. You can get your payments in a single payment, fixed monthly payments, a line of credit, or any combination of these options. There may be costs associated with a reverse mortgage, such as an origination fee, an appraisal fee, and a fee for title work. These costs can usually be added into the loan.

The money you get from a reverse mortgage is tax-free and doesn't affect your Social Security or Medicare benefits. However, the money you get from a reverse mortgage counts toward your income when determining your eligibility for Medicaid or other state assistance programs.

Advantages Disadvantages
There are no income or medical requirements to qualify. The cost of your long term care expenses might be higher than your reverse mortgage payments.
You can choose how your money from the reverse mortgage will be paid -- in a lump sum, regular monthly payments for a specified time, or for the rest of your life. If you outlive the length of your reverse mortgage payments, you may have to sell your home to repay the reverse mortgage loan.
The money you get from a reverse mortgage is tax-free (for more information, contact the IRS). If you sell your home or you no longer live in it permanently, and if you used all of your equity to pay off the reverse mortgage loan, you might not have anything left for your heirs.
When you sell your home, no longer live in it permanently, or die, any value remaining in your house after the reverse mortgage is paid off belongs to you or your heirs. The money you get from a reverse mortgage might count as income or an asset, affecting your eligibility for Medicaid or other state assistance programs.
Reverse mortgages don't affect any of your other assets, such as your personal checking or savings accounts. Because you own your home, you must still pay for your property taxes, homeowner’s insurance, home repairs, and utilities. If you don't pay for these, you might have to repay the loan in full immediately.