• What is a Reverse Mortgage

  • Mar 6 2025
  • Length: 5 mins
  • Podcast

What is a Reverse Mortgage

  • Summary

  • A reverse mortgage is a type of loan available to homeowners aged 62 and older that allows them to convert part of their home equity into cash. Unlike a traditional mortgage, where the homeowner makes monthly payments to a lender, a reverse mortgage pays the homeowner. The loan is repaid when the homeowner sells the home, moves out permanently, or passes away.

    Key Features of a Reverse Mortgage:
    No Monthly Payments: Borrowers receive payments instead of making them, though they must continue paying property taxes, homeowner’s insurance, and maintenance costs.
    Loan Repayment: The loan balance increases over time as interest accrues and is repaid when the borrower no longer lives in the home.
    Home Retention: The homeowner retains ownership of the home as long as they meet loan obligations.
    FHA-Insured Option: The most common type of reverse mortgage is the Home Equity Conversion Mortgage (HECM), which is insured by the Federal Housing Administration (FHA).
    Ways to Receive Funds:
    Lump Sum – A one-time payment.
    Monthly Payments – A steady income stream.
    Line of Credit – Borrow as needed.
    Combination – A mix of the above options.
    Pros & Cons
    ✅ Pros:

    Provides financial relief for retirees.
    No repayment is required while living in the home.
    Flexible payment options.
    ❌ Cons:

    Loan balance increases over time.
    May reduce inheritance for heirs.
    Fees and interest rates can be high.
    Would you like to explore if a reverse mortgage is right for your situation?


    Tune in and learn at https://www.ddamortgage.com/blog

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