1. What Is a Reverse Mortgage?

A reverse mortgage is a loan available to homeowners aged 62 or older, allowing them to borrow against their home equity without selling or making monthly payments.

The most common type is the Home Equity Conversion Mortgage (HECM), insured by the federal government.

How it works:

• You remain the owner of your home.
• You receive funds as a lump sum, monthly payments, or a line of credit.
• The loan is repaid when you move out, sell the home, or pass away.

2. Who Qualifies?

To be eligible, you must:

• Be 62 years or older
• Live in the home as your primary residence
• Own the home outright or have a low mortgage balance
• Attend a HUD-approved counseling session

Your home must also meet certain conditions (usually single-family homes or FHA-approved condos).

3. Benefits of a Reverse Mortgage

• No monthly mortgage payments
• Access to tax-free cash (based on loan type)
• Stay in your home while using its equity
• Flexible use: pay off debts, cover medical expenses, supplement retirement income

4. Potential Drawbacks and Risks

• Fees and closing costs can be high
• Reduces home equity for heirs
• Must maintain the home and keep up with property taxes & insurance
• Loan becomes due if you move out or pass away
• May affect eligibility for need-based benefits (like Medicaid)

5. Questions to Ask Before Applying

• Can I afford property taxes, insurance, and upkeep?
• Do I plan to stay in this home long-term?
• How will this affect my family or estate?
• Are there better alternatives (downsizing, HELOC, selling)?
• Have I spoken with a HUD-approved counselor?

Conclusion

A reverse mortgage can provide financial flexibility and stability in retirement — but it’s crucial to understand the full picture. For some, it’s a smart way to stay financially independent. For others, it may create complications for future plans or heirs.

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