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What You Need to Know About Reverse Mortgages: Our Guide

The median home value in the United States is around $247,084, and this could be a resource that you can tap into if you ever find yourself in a bind. While selling it and moving to another home is an option, this can be quite difficult, especially if you’ve already settled down. This is where a reverse mortgage can come in handy.

Now, the problem is that many Americans don’t understand or don’t even know what a reverse mortgage is. To help you out, we’ve prepared a brief guide that aims to explain everything you need to know about reverse mortgages. We’ll be discussing how it’s different from a conventional mortgage and talk about the reverse mortgage pros and cons so that you can make a more informed decision about your finances.

What is a Reverse Mortgage?

To put it simply, a reverse mortgage is a type of loan that’s only available to homeowners who are ages 62 and older. It allows them to borrow part of their home’s equity as tax-free income. This is essentially the opposite of a conventional mortgage, where the homeowner makes payments to a lender.

The unique aspect of reverse mortgages is that homeowners don’t make monthly payments. Instead of paying for the loan each month, the loan must be repaid in the case that the borrower passes away or if the home is ever sold.

How Do Reverse Mortgages Work?

One vital point to remember about reverse mortgages is that you can’t borrow your home’s entire value. This applies even if your entire mortgage has been completely paid for. Also, the amount that can be borrowed varies depending on several different factors. This usually includes the age of the borrower, the current interest rates, the Home Equity Conversion Mortgage (HECM) mortgage limit, and the overall value of the property. Older homeowners are more likely to get higher borrowing limits. 

It’s also important to note that the interest on the reverse mortgage accumulates every month. As such, you’ll need to keep paying property taxes, homeowner insurance, and for the upkeep of the property.

Misconceptions About Reverse Mortgages

Considering that reverse mortgages are a little more complicated than conventional mortgages, it makes sense that there are still things about it that people don’t understand. To help clear things up, we’ll be discussing and clearing up common misconceptions about reverse mortgages.

The first thing we have to address is the misconception that you can only reverse mortgage your home once you own it. This is inaccurate because it fully depends on how old the borrower is. If you are 62 years old, you can reverse mortgage your home as long as you have a minimum loan-to-value ratio of 45%. This varies depending on the age of the borrower, with older borrowers needing a higher loan-to-value ratio.

Another common misconception is that the lender will own the property that’s been reversed mortgaged. Similar to how a conventional mortgage works, the borrower will still own and keep the title of the property. 


At this point, we hope that this article has helped you understand reverse mortgages better. At the same time, be sure to use this information wisely to make more informed financial decisions. Ultimately, you can always work with a professional who can guide you through your journey.

If you have any more questions about reverse mortgages or mortgages in general, we’re here for you. America’s Mortgage Solutions can help you figure out the best mortgage option that best suits your needs, whether you’re looking for conventional loans or first-time homebuyer programs in Palm Beach, FL. Get in touch with us today to see how we can help!