It’s a versatile home equity loan created specifically for older homeowners and homebuyers, allowing them to turn part of the equity they’ve built up in their home into funds they can use as they choose.
It’s a lot like a mortgage you’d get from a bank or credit union (in fact, many of them offer reverse mortgages). However, there are key differences that make reverse mortgages better suited for people who are retired or looking ahead to retirement.
Most reverse mortgages are FHA-insured* Home Equity Conversion Mortgages (HECMs). The typical reverse mortgage candidate is at least 62 years old, has 50% or greater equity in their home, and wants to:
- Reduce or eliminate monthly mortgage payments. As with any mortgage, you must meet your loan obligations: keeping current with property taxes, homeowners insurance and keeping your home in good condition (or good shape).
- Consolidate other debt, such as credit card balances
- Make home improvements
- Establish a line of credit to be available for unplanned expenses
In addition to HECMs, some lenders have also introduced proprietary loan products to accommodate a broader array of borrowers. For example, Reverse Mortgage Funding LLC (RMF) offers Equity Elite, which is available to those as young as 60 and designed specifically for higher-value homes, condominiums, and borrowers who want low up-front costs.1