The reverse mortgage is exactly what it sounds like. Instead of you making payments to a lender, the lender makes payments to you. While that may sound fantastic, the similarities pretty much end there.



The reverse mortgage is based on the equity in your home. Every time the lender makes a payment to you, it gets a bit of your equity. This equity is held as debt like in a traditional mortgage and interest is charged on the amount.

The number one question regarding reverse mortgages has to do with equity. Specifically, what happens if the equity is all used up before the borrower dies or the home is sold? Do you lose the home, get foreclosed on or what?

This is exactly what happened when these loans were first offered. This unsavory result did not stand. The federal government got involved. In most current situations, you are allowed to remain in the home, but payments to you stop.

Another common question is how big will the monthly payments made by the lender be? There are a number of factors that go into the determination. These include the amount of equity in your home, the interest rate charged on the loan, the costs and the fees.

While you should be concerned about how the payment is calculated, it is important to understand there is an easier way to determine it. Just ask to see examples. Multiple programs are available and they should show you the estimated payment amounts.

At some point in time, you might realize a reverse mortgage is not for you. Can you get out of it? Generally, you can so long as you pay off the mortgage debt. Make sure to read the loan documents for language on this issue.

Real estate is beautiful because it appreciates most of the time. After getting a reverse mortgage, can you still tap this appreciation? The answer is usually yes, but you may have to refinance the property to do so.

If the program works well, you will pass away before the equity in your home runs out. Odd to say that, but it is true. At that time, your home will pass to your heirs who will either pay off the mortgage or sell the home.

In some cases, the reverse mortgage makes sense. In others, it does not. The only way to make a determination is to discuss the details with a financial professional.