A reverse mortgage is known as a way to supplement a senior’s fixed income with equity accumulated in their home. Older Americans are allowed to buy a new home by taking out a reverse mortgage, and new homes can also be bought with a reverse mortgage. A reverse mortgage is a type of home loan that allows the homeowner to borrow against the value of their home. The repayment of the mortgage (principal and interest) is required when the borrower dies or the house is sold. A reverse mortgage can be taken out, but it is not suitable for everyone and can cause problems for some people.


Here are some important points you need to know about reverse mortgages before applying: The minimum age is 62 and is actually intended for older Americans who have tied their home as an asset to the home they already own. Seniors who need a replacement for their existing home can buy a new home with a reverse mortgage.


The borrower must own the property directly, the house must be the borrower’s primary residence and must have considerable equity. They must not have any debt – no federal debt and be able to repay at least 10 percent of their mortgage debt. The property must meet the requirements of the Federal Housing Finance Agency (FHA) and the US Department of Housing and Urban Development. The borrower must live in the unit for at least three years, with at least two years left in the house. Condominiums have been approved for use by the Federal Housing Finance Agency (FHA) and the U.S. Department of Housing and Urban Development.


The change, introduced in October 2017, makes it easier to get a reverse mortgage on a new one – outside your own home. Previously, a document of the property was required when applying for the loan, but now the document is provided after the loan is completed. The new house bears the name of the senior citizen, but the lender retains the security and interest in it. The monthly installment is a typical mortgage, and many of the costs can be repaid with the loan. The repayment to the lender is the amount borrowed plus accrued interest, but with no personal liability in the end. When the home is sold, the loan can be repaid if the borrower moves out or dies and the remaining assets are owned by his heirs or estate.


If the loan balance exceeds the value of the property, the lender is insured against a loss. Conversely, buying mortgages allows older Americans to buy homes that meet their needs without having to throw away their retirement savings at home, as would be the case with a purely cashless transaction. You can also avoid dipping into the fixed monthly income that would come with taking out a traditional mortgage.

elderly couple struggling with their mortgage

“It’s not just a mortgage product, it’s a financial cash-flow tool for retirees”, said David Siegel, senior vice president, and chief financial officer of the National Association of Realtors.

If you don’t want to siphon off assets, it gives you more purchasing power, but you also have the option of getting a better deal, adding an upgrade you want, or making a mortgage payment. One downside is that seniors are more likely to lose equity in the second home than build it. In this case, it is nothing, depending on the housing market, but what is left to settle the mortgage, goes to the heirs of the owner.