How a Reverse Mortgage Works

The Mechanics of a Reverse Mortgage

A Home Equity Conversion Mortgage (HECM) allows homeowners aged 62 and older to convert a portion of their home equity into tax-free cash without having to sell the home, give up title, or take on a new monthly mortgage payment.

However, the mechanics of how the loan balance grows and how interest accrues can be complex. In our guides, we break down:

• Interest Rates: The difference between fixed and adjustable rates, and how the SOFR index affects your loan.
• The Line of Credit: How the growing line of credit works and why it is a powerful financial tool for retirement.
• Payment Plans: Choosing between a lump sum, monthly term, or tenure payments.
• Borrower Requirements: What it takes to pass the Financial Assessment and the importance of paying ongoing property taxes.

Our goal is to ensure you fully understand the mechanics of the loan before signing any paperwork. Explore our latest articles to learn more.