A reverse mortgage can allow eligible homeowners to access part of the equity in their home without required regular mortgage payments and without having to sell the property today.
The question isn't whether reverse mortgages are good or bad. It's whether the structure actually makes sense for your situation, your cash flow and your longer-term plans.
Eliminate an existing mortgage payment? Improve monthly cash flow? Access cash? Help family? Stay in the home longer?
Once we know the problem we're solving, we can compare a reverse mortgage with the other options that may actually be available.
Tell Me What's Going On →Reverse mortgages come with a lot of assumptions. This five-part series deals with the questions homeowners and their families tend to ask first.
One of the biggest myths is that the lender somehow takes ownership of your property when you get a reverse mortgage.
You borrow against part of the equity in your home. Instead of making required regular principal and interest payments, interest is generally added to the mortgage balance and the loan is repaid later.
Eligibility and available proceeds depend on factors including age, property value, location and existing mortgage debt.
Funds may be used to pay out a mortgage, improve cash flow, consolidate obligations or fund other needs.
With no required regular mortgage payments, interest is generally added to the outstanding balance over time.
The mortgage is typically repaid following a sale, permanent move from the property or estate settlement.
It tends to be most useful when a homeowner has substantial equity but monthly cash flow or traditional mortgage qualification has become restrictive.
Paying out an existing mortgage can materially reduce monthly obligations during retirement.
Access equity without being forced to sell simply because conventional financing no longer works.
Home equity can provide funds for larger expenses or supplement available retirement cash flow.
Consolidating higher-payment obligations can simplify monthly finances.
Some homeowners choose to access part of their equity during their lifetime rather than waiting for the estate.
The timing of a future sale or downsizing decision can remain in your hands.
Because required regular mortgage payments are generally not being made, interest is added to the outstanding mortgage balance.
That makes the time horizon important. The amount borrowed, property value, future housing plans and expected length of time in the home all affect the longer-term outcome.
The objective should not automatically be to borrow the maximum available. It should be to access the amount that actually solves the problem.
A reverse mortgage should be compared against the realistic alternatives rather than treated as the automatic answer.
The right financing depends on what you qualify for, what you're trying to accomplish and what matters most over the next several years.
A reverse mortgage does not remove the normal obligations of owning and maintaining your property.
Before deciding whether a reverse mortgage makes sense, we look at what you're trying to solve and compare the realistic alternatives.
Age, property value, existing mortgage, income, monthly cash flow and future housing plans.
Reduce payments, create cash flow, access equity, help family or delay a sale.
Refinance, HELOC, alternative financing, downsizing and reverse mortgage options where appropriate.
Review cost, cash flow, future balance, flexibility and how the mortgage would eventually be repaid.
Adult children often have reasonable questions about ownership, inheritance and what happens years from now. When appropriate, those conversations should happen before the mortgage is arranged — not after.
The purpose isn't to convince anyone to get a reverse mortgage. It's to understand whether the numbers and the strategy actually make sense for the family.
Rick Bettencourt · Mortgage Broker, Level 2Tell me your age, approximate home value, existing mortgage and what you're trying to accomplish. We can determine whether a reverse mortgage is even worth exploring.
