The Benefits of a Reverse Mortgage

The primary benefit of a reverse mortgage is that it allows eligible homeowners to keep living in their homes and use their equity for whatever purpose they choose. Depending on the lender, borrowers can choose to receive monthly payments, a lump sum, a line of credit, or some combination of these. A line of credit offers the most flexibility by allowing homeowners to write checks on their equity when needed up to the limit of the loan.

Reverse mortgages differ from home equity loans in that most reverse mortgages do not require repayment of principal, interest, or servicing fees as long as you live in the home. Instead, the loan is repaid when you die or sell the home.

The proceeds of a reverse mortgage generally are tax-free, and interest on reverse mortgages is not deductible until you pay off the debt. When you die or move out, the loan is paid off by selling the property. Any leftover equity belongs to you or your heirs.

Many reverse mortgages have no income restrictions. If you receive Social Security Supplemental Security Income, reverse mortgage payments do not affect your benefits as long as you spend them within the month they are received. This rule is also valid for Medicaid benefits in most states.