As you get money through your reverse mortgage, interest is added onto the balance you owe each month. Some also charge mortgage insurance premiums (for federally-insured HECMs). Reverse mortgage lenders generally charge an origination fee and other closing costs, as well as servicing fees over the life of the mortgage. Here are some things to consider about reverse mortgages: In certain situations, a non-borrowing spouse may be able to remain in the home. When the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence, the loan has to be repaid. The money you get usually is not taxable, and it generally won’t affect your Social Security or Medicare benefits. Instead of paying monthly mortgage payments, though, you get an advance on part of your home equity. If you get a reverse mortgage of any kind, you get a loan in which you borrow against the equity in your home.
There are three kinds of reverse mortgages: single purpose reverse mortgages – offered by some state and local government agencies, as well as non-profits proprietary reverse mortgages – private loans and federally-insured reverse mortgages, also known as Home Equity Conversion Mortgages (HECMs). Sometimes that means selling the home to get money to repay the loan. When you die, sell your home, or move out, you, your spouse, or your estate would repay the loan. Generally, you don’t have to pay back the money for as long as you live in your home. Reverse mortgages take part of the equity in your home and convert it into payments to you – a kind of advance payment on your home equity. In a reverse mortgage, you get a loan in which the lender pays you. When you have a regular mortgage, you pay the lender every month to buy your home over time. Be Wary of Sales Pitches for a Reverse Mortgage.
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