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How To Use A Reverse Mortgage

Updated on September 3, 2012

Are Reverse Mortgages Good or Bad?

In the economical climate of today, more and more seniors are becoming enamored with the idea of reverse mortgages

However, as in many situations today with economics, it pays to learn more about reverse mortgages before entering into one. 

This is a fact that even the government understands all too well because in order for a senior to enter into a reverse mortgage, the homeowners have to go through counseling with HUD (Housing and Urban Development). 

Let's examine the mechanics of reverse mortgages and some pros and cons and see how reverse mortgages shake out.

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How Reverse Mortgages Work

A reverse mortgage takes the equity you have in your home and converts it into cash that can be paid to the homeowner in several ways. 

You can receive a monthly amount of money, a lump sum or a combination of both. 

Why Do Seniors Need Reverse Mortgages?

Seniors are turning to reverse mortgages because living on a fixed or reduced income makes it nearly impossible to come up with the cash needed for unexpected major home repairs, medical bills or other catastrophes. 

Most seniors considering reverse mortgages want to remain in their own homes as long as they can and not be a burden to their family and friends. 

Are There More Pros Than Cons to Reverse Mortgages or Vice Versa?

The feasibility of a reverse mortgage all depends on the individuals involved.  Reverse mortgages are extremely popular right now in California, New York City, Denver, Phoenix, Boston and parts of Florida. 

While reverse mortgages are on the rise, they still account for about 7/10ths of 1% of mortgages. 

Let's look at the advantages and disadvantages.


  • Reverse mortgages are easy to qualify for because they aren't based on credit scores or income.
  • The homeowner does not make any monthly payments - ever.
  • A reverse mortgage can be set up to be paid to the homeowner in a lump sum, a line of credit or as a monthly payment
  • The homeowner will receive income monthly as long as he or she lives in the house as their primary residence. 
  • This means that even if the loan balance is higher than the home is worth, they will still receive money every month.
  • The only time a monthly payment is due from the homeowner is when he or she dies, moves or sells the house.  Then the loan is due in full plus interest and fees.
  • The homeowner nor heirs will ever owe more than the home is worth. 
  • This is no matter how many payments are received and in spite of how high the interest rates go.


  • Homeowners must be 62 years of age or older to qualify for a reverse mortgage.
  • Medicaid payments or any other federal or state program payments can be cut off in certain circumstances due to the homeowner receiving money, for instance a reverse mortgage payment made to the homeowner.  
  • It's important to see if any programs are subject to withdrawal by entering into a reverse mortgage.
  • Closing costs are higher than any conventional mortgage.  These fees can be double what they are with traditional mortgages and include origination fees, mortgage insurance and points.
  • Homeowners continue to be responsible for paying property taxes, homeowner’s insurance and of course, have to cover all repairs out of pocket.
  • If the homeowner becomes ill and has to go to a nursing home for instance, this changes the complexion of the loan and the reverse mortgage can become due. 

Alternatives to Reverse Mortgages

Standard equity loans are a viable alternative to a reverse mortgage.  It too is based upon the equity in the homeowner’s home but it is not attached to fees and closing costs. 

An equity loan can land you with a nice chunk of change in the bank for emergencies or home repairs but the downside to a conventional equity loan of course is that the payment is due each month and increases your bills.

Another great alternative that many seniors do not know about is the National Council on Aging.  They have information on many programs, grants and free services available to seniors such as replacing outdated furnaces, windows, and assistance through donation of  needed repairs. 

Contact your local government offices or the National Council on Aging if you are a senior and need help with home repairs.

Reverse mortgages seem to be a positive thing for many seniors.  However, the most important thing to remember before entering into a reverse mortgage is to get your facts straight. 

Appropriate sources of information are lenders who deal in reverse mortgages but you need someone who is unbiased and who does not have a vested interest in reverse mortgages.....and most specifically in YOUR reverse mortgage. 

More Considerations on Reverse Mortgages

Some lenders are all in favor of reverse mortgages because they get their cash right away via the high closing costs. 

Realtors on the other hand don't like reverse mortgages because they only make money when a home is sold. 

Getting more than one opinion is essential and also participate in the HUD counseling which is mandatory. 

Ask every possible question that you can think of such as "what happens if I get sick and have to go to a nursing home for 2 months?" 

Factors that should not be figured into reverse mortgages but usually are is leaving something to the homeowner's heirs or feeling that the homeowner has “lost” equity or control of their home. 

These are questions that the individual homeowner must decide but if a reverse mortgage is something a senior needs to do, then inheritance should be the least consideration.

There are many factors to consider when entering into a reverse mortgage but all you can do is weigh the options and decide what's best for you.


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    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks again, Sid~! I appreciate that...coming from you a compliment indeed!

    • sid_candid profile image


      9 years ago

      Great informative and well crafted hub. Many Congratulations on your win.

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks Winkrez~

    • profile image


      9 years ago

      Great info...keep it up!

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks for stopping by, Mark - that is great to know!! My folks are thinking about it still so I did a lot of research on it for them.

    • Mark Upshaw profile image

      Mark Upshaw 

      9 years ago from Long Beach, CA

      Well written hub. I helped my parents out with their reverse mortgage and it was a godsend to them. We don't want their 900 sq ft house in Los Angeles. They are independent now and have no debt, no stress and retired.

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      K9keystrokes....that is totally dynamite that you feel that I explained it well because I'm not an expert on finance and was worried that perhaps I didn't explain it well enough! Thanks very much for the kind comment.

    • K9keystrokes profile image

      India Arnold 

      9 years ago from Northern, California

      You provide good information for people to consider before taking out a reverse mortgage. Easy to understand, most banks and lenders do not know how to explain this very well. You should be giving them lessons on the unique aspects of this type of home loan. You earned a well deserved win, congratulations!


    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Deni - Thanks so much for stopping by and thanks for your kind comments! I'm glad it made sense....I always wonder when I'm writing if it truly does.

    • Deni Edwards profile image

      Jenifer L 

      9 years ago from california

      Great hub! I've always been curious about how reverse mortgages work. Very well-written and clear. Thanks!

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks, Hanna!

    • Hello, hello, profile image

      Hello, hello, 

      9 years ago from London, UK

      Great information and very explicit.

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks Nell~! Appreciate your vote!!

    • Nell Rose profile image

      Nell Rose 

      9 years ago from England

      HI, Audrey, great information, and congrats! you got my vote for this too!

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Travelman, thanks so much for the note - and I hope so too for the Philippines.

      Loren's Gem - Thanks so much for stopping by and for the congrats!

    • Loren's Gem profile image

      Loren's Gem 

      9 years ago from Istanbul, Turkey

      Great share! I learned lots about reverse mortgages - including its pros and cons after reading this hub. I also appreciate that you included a list of some other alternatives to it. Rated and voted it up! Congrats on your win! :-)

    • travel_man1971 profile image

      Ireno Alcala 

      9 years ago from Bicol, Philippines

      Congrats on your winning. Reverse mortgages is new in the Philippines. I hope the government will give emphasis to seniors by fully implementing this. Thanks, Ms. A! :D

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Purple Perl - Thanks for sharing your info from the India front - that is fascinating!

    • Purple Perl profile image

      Esther Shamsunder 

      9 years ago from Bangalore,India

      The concept of reverse mortgages is new in India. Senior citizens can make use of this only if they have the consent of their children which many do not get. A well written hub as usual and congrats,Audrey.

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks, Oceans - I really appreciate it!

      Michael Jay - thanks so much!!

      OM - I thought your hub was fantastic on the small biz scenarios.....I appreciate you stopping by and treasure your congrats.

    • Om Paramapoonya profile image

      Om Paramapoonya 

      9 years ago

      Very nice. I've learned so much from this hub. And hey, congrats on your win. :)

    • Michael Jay profile image

      Michael Jay 

      9 years ago

      Congrats on your win, akirchner! Wonderful hub.. :)

    • oceansnsunsets profile image


      9 years ago from The Midwest, USA

      AKirchner, thanks for sharing this information on Reverse Mortgages, great hub! Congratulations on your staff pick win as well for the contest!

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks, Steph - My mom is thinking about it so needed to do the research....and then pass it onto Bob!

    • stephhicks68 profile image

      Stephanie Marshall 

      9 years ago from Bend, Oregon

      Great job Audrey! Love the hub and its well deserving of a win. Reverse mortgages are something that many people might be considering as they near (or are in) retirement.

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks very much, Serj and to you as well!

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Thanks so much, Simone....I learned a lot and was able to pass it on to my mom who was curious about them!

    • Simone Smith profile image

      Simone Haruko Smith 

      9 years ago from San Francisco

      akirchner, this is an EXCELLENT overview of reverse mortgages! I love how you have neatly organized the Hub, and the video explanations in some of the sections add great utility! Thanks for writing this.

    • akirchner profile imageAUTHOR

      Audrey Kirchner 

      9 years ago from Washington

      Pamela - It does sound tempting in many ways but I'm not sure it would be the best idea either. My mom's considering it but I figure it's up to everyone to make their own decisions.

    • Pamela99 profile image

      Pamela Oglesby 

      9 years ago from Sunny Florida

      I have never liked the idea of a reverse mortgage and hope we won't have to do something like that. You article taught me several things I didn't know however, so maybe they aren't so bad. Thanks for the information.


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