What is a Reverse Mortgage and is it Right for You? 

What is a reverse mortgage? Hardly a day passes without hearing an advertisement for a reverse mortgage, but while you may be familiar with the term, we doubt you’re familiar with what a reverse mortgage actually is.

Because we knew very little about reverse mortgages we decided to do a little research. This topic was especially important to us because it mostly affects senior citizens who may be confused about their options (heck, everyone is confused when it comes to mortgages!).

According to the U.S. Census Bureau there were 41.4 million people aged 65 or older in 2011, with that number projected to jump to 92 million by 2060.

What is a Reverse Mortgage?

A reverse mortgage is an option for those 62 and older who own their home outright or have a lower mortgage balance that can be paid off at closing with the proceeds.

With a traditional mortgage, what’s really happening is the lender buys the house FOR you and you make payments to them on the principal and interest until you fully buy it. Even though the lender technically owns the home until you pay it off, you move in right away and live there.

With a reverse mortgage, the lender is buying the house FROM you and they make a payment every month to you. Also like a traditional mortgage, the lender keeps track of the interest on the balance they’ve paid to you, although they don’t pay you monthly interest (we’ll discuss this more in a moment).

While there are some other options out there, most reverse mortgages are FHA insured through a program called HECM (Home Equity Conversion Mortgage), and this is the only program we recommend.

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