What is a reverse mortgage?

A reverse mortgage lets you turn part of your home’s value into cash by tapping into your home equity (the part of your home you own).

A reverse mortgage is different from a traditional mortgage. Instead of you paying a lender every month like a traditional mortgage, the lender pays you based on your home’s value and how much equity you have.

You still own your home.

The loan is paid back later, typically when you move out, sell the property, or pass away.

People often use reverse mortgages to add to their retirement income, cover medical expenses, or reduce financial stress while continuing to live at home.

How do reverse mortgages work?

To qualify for a reverse mortgage, you must be at least 62 years old and either own your home outright or have a significant amount of equity.

Once approved, you can choose how to receive your money:

• As a one-time lump sum
• As fixed monthly payments
• As a line of credit (which works like a credit card where you borrow only when you need to, up to a certain limit)

The loan doesn’t need to be paid back right away.

You continue living in your home, and you still pay for property taxes, insurance, and upkeep. The balance, which includes interest, is typically repaid when you move out, sell the home, or pass away.

Benefits of a reverse mortgage

• No monthly mortgage payments
• Stay in your home while accessing cash
• Flexible payment options (choose how you receive the money)
• Can free up money for retirement expenses

Reverse mortgage rates and fees

Reverse mortgage rates are usually a bit higher than regular mortgage rates. Rates may be fixed (stay the same) or variable (change over time). Other fees can include:

• Origination fee: The cost to set up the loan
• Servicing fees: For managing your loan
• Closing costs: Fees related to processing and finalizing the loan

To get an idea of how much you might be able to borrow, check out a reverse mortgage calculator available on one of our partner lenders' websites. These tools estimate your loan amount based on your age, home value, and current interest rates.

Reverse mortgage pros and cons

Turns home equity into cash without selling your home
No required monthly loan payments
Choose how you receive the money (lump sum, monthly, credit line)

Reduces the equity left in your home
Interest and fees increase your loan balance over time

How to choose the best reverse mortgage company

Here are key things to look for when comparing reverse mortgage lenders:

• Clear and upfront information about fees and terms
• Competitive interest rates
• Positive customer reviews
• Educational resources to help you understand your options

Be cautious of lenders that use high-pressure sales tactics or bury important details in fine print.