Reverse Mortgages

What is a Reverse Mortgage

House Model Over Reverse Mortgage Blocks In Front Of Businessman Writing On Paper Over Desk

A Reverse mortgage is a type of loan designed for senior citizens age 62 and older. A senior can acquire a reverse mortgage as long as he has substantial property equity. Compared to forwarding mortgages, like the typical home loans, homeowners with a reverse mortgage do not need to make monthly loan payments.

A person with a reverse mortgage can choose how to pull out the money. They can do this through a credit line, monthly payment, or lump sum. Many of you may not understand why individuals lend money against their property. But, if you are one of them, you have found the right place.

This post will talk about everything you should know about a reverse mortgage.

Key Takeaways: Reverse Mortgage

  • A reverse mortgage may be an excellent financial decision for seniors but not much for others. Thus, you must assess its pros and cons and how it can affect your family before applying for a reverse mortgage.
  • Although the federal government ensures many reverse mortgages, it is prone to scammers victimizing seniors.
  • This type of loan allows homeowners to acquire money depending on their home equity. The good thing about this loan is borrowers don’t need to pay monthly mortgage payments.
  • This type of loan is specifically designed for senior citizens.

How Does A Reverse Mortgage Work?

In some cases, other homeowners may not be eligible to apply for a reverse mortgage. This is true even though you have already paid your entire mortgage.

In line with that, some factors may affect how much you can borrow under a reverse mortgage loan. These may include the home’s value, HECM mortgage limit, the existing home’s interest rates, and the age of the eligible non-borrowing wife/husband.

The older the senior and the lower his home interest, the higher the reverse mortgage he may receive. If you have a variable-rate HECM, you can also apply for a higher principal limit. These variable rates have different options, including the following:

  • A combined method of set monthly payments and line of credit for a fixed timeframe
  • A combined method of set monthly payments and line of credit for as long as you stay in the property
  • A line of credit you can use until its expiration date
  • Monthly payments you will receive for a fixed timeframe you and your lender has agreed on earlier
  • Equal monthly payments as long as the borrower consider the property as his primary residence

On the other hand, if you prefer HECM with a set interest rate, you can receive the money through a lump-sum or single-disbursement payment. However, it is worth noting that a reverse mortgage’s interest rate may increase over time. And you are still required to maintain a reasonable income enough to pay homeowners insurance and property taxes.

Different Types Of Reverse Mortgages

What Are The Different Types Of Reverse Mortgages?

A reverse mortgage is available in three major types. Below is a detailed description of each type to know which suits your financial needs better.

Single-Purpose Reverse Mortgage

In most cases, local and state government agencies and non-profit organizations issue a single-purpose reverse mortgage. Among the three options, this one is the cheapest. But, it only works for homeowners who want to borrow a small amount of money. In addition, you can only use this loan for a single purpose.

Proprietary Reverse Mortgage

Compared to other mortgage loans available, a proprietary reverse mortgage is not guaranteed by the federal government. However, this one allows you to receive a slightly more significant than the first type. This is especially true as long as your home has a commendable value.

HECM (Home Equity Conversion Mortgage)

Among all three types of reverse mortgages, HECM is the most prominent market. Unlike the two previously mentioned types, this one allows you to use the money for different purposes. However, it comes with an expensive upfront cost.

You can also select how you want to receive the money in line with that. For example, it can be through a line of credit of fixed monthly payments. Even though this reverse mortgage is available worldwide, only FHA-approved lenders like Gold Star Mortgage Financial Group can issue the money. Your lender will also send you HUD-approved counseling before loan closing.

What Is The Maximum Amount You Can Receive From A Reverse Mortgage?

Several factors may greatly affect how much money you can receive from a reverse mortgage. These elements may include your financial assessment, your preferred type of reverse mortgage, your property’s current interest rate, your age, and your total home value.

Aside from that, the amount of money you can get from a reverse mortgage may also be affected if you have any other liens or mortgages. For instance, if you have an existing tax lien or home equity loan, you may receive a lower reverse mortgage, which will require you to pay it first.

No matter what type of reverse mortgage you choose, it is essential to remember that you can only convert a portion of your home equity into cash.

Pros And Cons Of Reverse Mortgage

Like other mortgages available in the market, a reverse mortgage also comes with flaws. Listed below are the advantages and disadvantages of a reverse mortgage:


  • A reverse mortgage can be used to protect you against foreclosure.
  • A non-borrowing wife or husband can still stay in the property even after the death of the borrowing spouse.
  • The funds you can get from a reverse mortgage may give you a more satisfying retirement
  • You can use the funds to cover medical bills, debt repayment, healthcare expenses, and more
  • You don’t need to worry about monthly payments when you have a reverse mortgage.


  • Borrowers need to pay homeowners’ insurance and property taxes per month.

Final Thoughts

The reverse mortgage is one of the unique types of home loans you can get as it does not require repayment. But, take note that it only works with individuals age 62 and above. Beyond that, the amount you can get from a reverse mortgage can be used for different purposes.

You may consider a reverse mortgage if you need funds for your retirement without paying monthly fees.

To discuss reverse mortgages or other loan products, contact the Ballard Team at Goldstar at 954-643-8539