ABA Family Legal Guide

The Rights of Older Americans

Housing and Long-Term Care Options

Home Equity Conversion

How does a reverse mortgage work?

A reverse mortgage lets you borrow against the equity in your home, receiving a lump sum or monthly installments, or drawing on a line of credit. The amount of the loan you will receive is based on your age, the value of your home and your equity, the interest rate, the term of the loan, and some other factors. Except for some special-purpose state- or local-government-sponsored plans, like those designed to pay for home repairs, there are no restrictions on how you use the money.

The loan usually does not have to be repaid until you die, or sell or move from your home. When the loan does come due, the amount to be repaid cannot exceed the appraised value of the property.