What is a Reverse Mortgage?

A reverse mortgage is a type of home loan designed specifically for homeowners who are 62 years old or older. The Home Equity Conversion Mortgage (HECM) is the most common type of reverse mortgage. This loan allows homeowners to borrow money using their home as collateral, just like a traditional mortgage. The title to the home remains in the borrower's name, and they are not required to make monthly mortgage payments.

One of the primary differences between a traditional mortgage and a reverse mortgage is that with a reverse mortgage, the loan is repaid when the borrower no longer lives in the home. The loan balance grows over time as interest and fees are added to the amount borrowed. Homeowners are required to pay property taxes and homeowners insurance, and they must use the property as their primary residence and keep the house in good condition. As the loan balance grows, the homeowner's equity in the property decreases. Eventually, the loan must be repaid, typically by selling the home. It's important to note that a reverse mortgage is not free money; it's a loan that must be repaid with interest and fees.

There are some scams to be aware of when it comes to reverse mortgages. Contractor scams are one common scam, where contractors may approach homeowners about getting a reverse mortgage loan to pay for repairs to their homes. This is often a scam, and homeowners should not feel pressured to get a reverse mortgage loan.

Loan Type

Purchase Refinance with Cash out Refinance

State

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FICO Score

Superior (780-850) Exceptional (760-779) Excellent (740-759) Very Good (720-739) Good (700-719) Above Average (680-699) Average (660-679) Fair (640-659) Need Improvement (620-639) Poor (350-620)

Loan Amount

$

Points

Up to 0 points Up to 0.5 points Up to 1 points Up to 1.5 points Up to 2 points Up to 2.5 points Up to 3 points

LTV

%

Loan Term

 15-Year Fixed  20-Year Fixed  30-Year Fixed  5-Year ARM  7-Year ARM  10-Year ARM

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The lenders whose rates and other terms appear on this chart are ICB's advertising partners. They provide their rate information to our data partner RateUpdate.com. Unless adjusted by the consumer, advertisers are sorted by APR from lowest to highest. For any advertising partners that do not provide their rate they are listed in advertisement display units at the bottom of the chart. Advertising partners may not pay to improve the frequency priority or prominence of their display. The interest rates, annual percentage rates and other terms advertised here are estimates provided by those advertising partners based on the information you entered above and do not bind. Any lender Monthly payment amounts stated do not include amounts for taxes and insurance premiums. The actual payment obligation will be greater if taxes and insurance are included. Although our data partner RateUpdate.com collects the information from the financial institutions themselves, the accuracy of the data cannot be guaranteed. Rates may change without notice and can change intraday. Some of the information contained in the rate tables including but not limited to special marketing notes is provided directly by the lenders. Please verify the rates and offers before applying for a loan with the financial institution themselves. No rate is binding until locked by a lender.

Lender

APR / Rate

Fees / Points

Payment

NMLS #1835285

5.353%

15-Year Fixed

5.125%

$6,000

Includes 1.000 points for $4,000

Lender Fees: $2,000

$3,190 /mo

Next >

NMLS #401822

5.554%

15-Year Fixed

5.250%

$8,000

Includes 1.000 points for $4,000

Lender Fees: $4,000

$3,216 /mo

Next >

NMLS #1025894

5.634%

15-Year Fixed

5.490%

$3,760

Includes 0.765 points for $3,060

Lender Fees: $700

$3,267 /mo

Next >

NMLS #6606

5.884%

15-Year Fixed

5.740%

$3,732

Includes 0.933 points for $3,732

Lender Fees: $0

$3,320 /mo

Next >

NMLS #1835285

6.266%

30-Year Fixed

6.125%

$6,000

Includes 1.000 points for $4,000

Lender Fees: $2,000

$2,431 /mo

Next >

NMLS #1835285

6.371%

5-Year ARM

6.250%

$5,112

Includes 0.778 points for $3,112

Lender Fees: $2,000

$2,463 /mo

Next >

NMLS #1025894

6.582%

30-Year Fixed

6.490%

$3,856

Includes 0.789 points for $3,156

Lender Fees: $700

$2,526 /mo

Next >

NMLS #6606

6.715%

30-Year Fixed

6.625%

$3,708

Includes 0.927 points for $3,708

Lender Fees: $0

$2,562 /mo

Next >

NMLS #401822

6.746%

30-Year Fixed

6.625%

$4,995

Includes 0.750 points for $3,000

Lender Fees: $1,995

$2,562 /mo

Next >

NMLS #3030

6.784%

15-Year Fixed

6.625%

$4,000

Includes 1.000 points for $4,000

Lender Fees: $0

$3,512 /mo

Next >

NMLS #3030

7.476%

30-Year Fixed

7.375%

$4,000

Includes 1.000 points for $4,000

Lender Fees: $0

$2,763 /mo

Next >

Rate data provided by RateUpdate.com. Displayed by ICB, a division of Mortgage Research Center, NMLS #1907, Equal Housing Opportunity. Payments do not include taxes and insurance premiums. Actual payments will be greater with taxes and insurance included. Rate and product details.

Another scam to watch out for is those targeting veterans. The Department of Veterans Affairs (VA) does not offer any reverse mortgage loans. Some mortgage ads falsely promise veterans special deals, imply VA approval, or offer a "no-payment" reverse mortgage loan to attract older Americans desperate to stay in their homes.

It's important to know that with most reverse mortgages, homeowners have three business days after the loan closing to cancel the deal for any reason, without penalty. This is known as the right of "rescission." To cancel, homeowners must notify the lender in writing and send the letter by certified mail, requesting a return receipt. They should keep copies of any communication between themselves and the lender. After cancelling, the lender has 20 days to return any money paid for the financing of the reverse mortgage loan.

It's important to note that this information only applies to Home Equity Conversion Mortgages (HECMs), which are the most common type of reverse mortgage loans.

Reverse mortgages can be a useful financial tool for some homeowners, particularly those who are looking to supplement their retirement income. However, it's important to understand how they work and to be aware of potential scams. Homeowners should also consider seeking the advice of a financial advisor or other professional before taking out a reverse mortgage. They can help homeowners determine if a reverse mortgage is the right choice for their financial situation and needs.

In a nutshell, a reverse mortgage is a special type of home loan for homeowners aged 62 or older. With this loan, homeowners can borrow money using their home as collateral without making monthly mortgage payments. However, interest and fees are added to the loan balance each month, reducing the homeowner's equity in the property over time. Homeowners must use the property as their primary residence, keep the house in good condition, and pay property taxes and homeowners insurance. It's important to be aware of potential scams related to reverse mortgages and to understand the right of rescission, which allows homeowners to cancel the loan within three business days of closing.