Reverse Mortgages

A reverse mortgage is a specialized home loan for homeowners 62 and older that allows you to convert home equity into cash. Instead of making monthly payments to a lender, the lender pays you. You keep the home's title, and the loan is repaid when you sell, move out, or pass away. [1, 2, 3]

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How It Works

Unlike a traditional mortgage where you pay down a balance, a reverse mortgage balance grows over time as interest and fees are added to the principal. You can receive the funds as a lump sum, fixed monthly payments, or a line of credit. [1, 2, 3]

Types of Reverse Mortgages

Home Equity Conversion Mortgage (HECM): The most common type, insured by the FHA and backed by the government. These can be used for any purpose. [1, 2]
Single-Purpose Reverse Mortgage: Offered by state/local governments or non-profits. They are strictly for one specific approved use, such as home repairs or property taxes. [1]
Proprietary Reverse Mortgages: Private loans not bound by government limits, ideal for owners of high-value homes wanting larger loan advances. [1]

Eligibility & Rules

To qualify, you must own your home outright or have significant equity, and the property must be your primary residence. Even though you are not making mortgage payments, you are still legally required to: [1, 2, 3]

Pay property taxes and homeowners insurance.
Maintain the home in good condition. [1, 2]

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Important Considerations

Upfront Costs: HECMs come with significant closing costs, origination fees, and upfront mortgage insurance premiums.
Inheritance: Because the loan balance grows and equity decreases, it may significantly reduce the value of the home you leave to heirs.
Foreclosure Risk: Failing to keep up with your property taxes, insurance, or maintenance can result in the lender calling the loan and facing foreclosure. [1, 2, 3]

Learn More

If you are considering a reverse mortgage, consult authoritative sources to help weigh the pros and cons:

Read the Federal Trade Commission (FTC) Reverse Mortgages Guide for a comprehensive overview of how to spot scams and protect yourself.
Review the Consumer Financial Protection Bureau (CFPB) Reverse Mortgage Basics for specific homeowner responsibilities.
Visit the Washington State Department of Financial Institutions (DFI) Guide to understand how the repayment structure functions in detail. [1, 2]

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