Understanding the Basics of a Reverse Mortgage

• Lump Sum: A one-time payment at closing (only available with a fixed-rate loan).
• Monthly Payments: Regular disbursements for a set period or for as long as the
  homeowner lives in the home.
• Line of Credit: Funds that can be drawn as needed, with interest accruing only on the
  amounts taken.
• Combination: A mix of the above options, tailored to the homeowner's needs.

The amount available depends on factors such as the homeowner's age, the home's appraised
value, and current interest rates.

Key Considerations

• Financial Responsibilities: Homeowners remain responsible for property taxes,
  homeowners insurance, and maintenance. Failure to meet these obligations can lead to
  loan default and possible foreclosure.
  Consumer.gov
• Loan Repayment: The loan becomes due when the homeowner sells the home, moves
  out permanently, or passes away. Repayment is typically made through the sale of the
  home, with any remaining equity going to the homeowner or their heirs.
• Interest and Fees: Interest rates on reverse mortgages are generally higher than those
  on traditional mortgages. Additionally, there are upfront costs, including origination fees,
  closing costs, and mortgage insurance premiums.
  Forbes
• Impact on Inheritance: Since the loan balance increases over time, it can reduce the
  amount of equity left to heirs. Heirs will need to repay the loan if they wish to keep the
  home

Is a Reverse Mortgage Right for You?

Reverse mortgages can provide financial flexibility for retirees, allowing them to access home
equity to supplement income, cover medical expenses, or make home improvements. However,
they also come with obligations and can affect the homeowner's estate. It's crucial to consider
all options and consult with financial advisors and family members before making a decision.

For more detailed information, the Consumer Financial Protection Bureau offers resources on
reverse mortgages.

Consumer Financial Protection Bureau