Do You Know How a Reverse Mortgage Works?

In the United States, some banks and lenders are once again offering reverse mortgages in Lone Tree and other parts of the country as a financing option for seniors. Advertisements for this product have become common across TV, radio, and online platforms. But do you really know how it works?

A reverse mortgage is a loan that allows people aged 62 and older to unlock the value of their home and turn it into cash, without needing to sell or move out. Unlike a traditional mortgage where the borrower makes payments to the bank, with a reverse mortgage, the bank provides payments to the homeowner, usually in the form of monthly installments, a line of credit, or a lump sum.

After the homeowner passes away, the heirs can choose to keep the property by paying off the loan balance, or they can allow the lender to sell the home to recover the funds.

Requirements to Qualify

The applicant must be at least 62 years of age (in most cases).
The home must be the borrower’s primary residence and should be owned outright or with a very low mortgage balance.
The property must meet FHA standards and be kept in good condition.
Borrowers are required to stay current with property taxes, insurance, and basic maintenance.

The Application Process

Before applying, lenders are required to provide clear and detailed information about reverse mortgages, including costs, interest rates, and obligations. Seniors will also need to meet with a HUD-approved counselor who ensures they fully understand the risks and benefits.

When comparing lenders, it’s often recommended to use local business directories or financial advisor listings to find trusted providers in your area. Some institutions may also require a professional appraisal of the property before final approval.

Who Offers Reverse Mortgages?

In the U.S., reverse mortgages can be offered by FHA-approved banks, credit unions, mortgage lenders, and some insurance companies. Financial advisors and intermediaries often help seniors connect with the right institution to make the process easier.