A reverse mortgage is a loan, secured by a home, where repayment is deferred until a later date, typically when the home sells. There are 2 main differences between a reverse mortgage and a traditional mortgage. With a reverse, the payment stream is reversed. Rather that you making monthly payments to the bank, you are able to receive funds in a monthly payment to you or a lump sum. The second thing is that you balance on traditional mortgages decrease month to month since you are making principal and interest payments. On a reverse mortgage, your balance increases each month as interest accrues since you are not making payments. You are able to make payments though to reduce your balance, without penalty.
There are a several reverse mortgage products currently available, however the most popular product as of 2018 is the Home Equity Conversion Mortgage (HECM). Borrowers must be a minimum of 62 years old in order to get a HECM, although the program does allow for a younger non-borrowing spouse. The HECM is insured by the federal government. In order for HUD to guarantee the program, there is an upfront upfront Mortgage Insurance Premium (MIP) and an ongoing MIP that is charged to the borrower. If you run our reverse mortgage calculator you will be able to see this fee.
There are also jumbo reverse mortgages, also referred to as proprietary reverse mortgages. These products are not insured by HUD and are originated by us through large investors. Each of these have unique features that may work for your situation. If you have a higher home value or a condo that is in a complex that isn’t HUD approved, I would suggest reading more about these product offerings on our jumbo reverse mortgage page.