Reverse Mortgages: Using Your Home to Stay at Home

Author: National Council on Aging
Published: 2013/01/23 - Updated: 2025/03/02
Publication Details: Peer-Reviewed, Informative
Category Topic: Disability Housing - Academic Publications

Page Content: Synopsis - Introduction - Main - Insights, Updates

Synopsis: This report, authored by the National Council on Aging, introduces "Use Your Home to Stay at Home," a guide approved by the U.S. Department of Housing & Urban Development (HUD) to assist older homeowners in understanding reverse mortgages. It explains how Home Equity Conversion Mortgages (HECMs) enable individuals aged 62 and above to convert home equity into cash while remaining in their residences. The guide emphasizes the importance of unbiased counseling from HUD-approved agencies, ensuring that seniors make informed decisions regarding their financial options - Disabled World (DW).

Defining Reverse Mortgage

Reverse Mortgage: A reverse mortgage is a financial option available to homeowners aged 62 and older, allowing them to convert a portion of their home equity into cash without having to sell their home or make monthly mortgage payments. Instead, the loan is repaid when the homeowner moves out, sells the property, or passes away. The most common type, a Home Equity Conversion Mortgage (HECM), is federally insured and regulated by the U.S. Department of Housing and Urban Development (HUD). While reverse mortgages can provide financial relief for retirees by supplementing income or covering expenses, they also come with fees, interest, and potential risks, making it essential for borrowers to fully understand the terms and seek guidance from HUD-approved counselors before proceeding

Introduction

The National Council on Aging (NCOA) announces the availability of Use Your Home to Stay at Home, the official reverse mortgage consumer booklet approved by the U.S. Department of Housing & Urban Development (HUD).

Main Content

A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.

Use Your Home to Stay at Home is a user-friendly guide to help older homeowners understand the pros and cons of a reverse mortgage. Federal law requires that all individuals who are considering a reverse mortgage receive unbiased counseling by a HUD-approved counseling agency and receive a copy of the NCOA guide.

Also known as Home Equity Conversion Mortgages (HECMs), reverse mortgages allow homeowners aged 62+ to convert a portion of their home equity into cash while they continue to live at home for as long as they're able. Over the past 20 years, a growing number of older homeowners have used this financial tool. Today, most borrowers use the loans for immediate needs, such as paying off their existing mortgage or other debts. About 33% want to supplement their monthly income, so they can afford to continue living independently in their own home longer.

"Use Your Home to Stay at Home is an older homeowner's best resource when it comes to examining whether a reverse mortgage is right for them," said Amy Ford , director of NCOA's Reverse Mortgage Counseling Services Network. "Along with reverse mortgage counseling from a HUD-approved counselor, the guide is a trusted source of information for older adults to understand their options before they commit to a loan."

The 2013 version of Use Your Home to Stay at Home reflects the latest statistics and rules related to reverse mortgages. The guide can be downloaded for free. Housing and reverse mortgage counselors can order multiple copies.

"Reverse mortgages can be a useful piece of the puzzle when it comes to helping older adults make ends meet and stay independent as long as possible," Ford said. "However, they're not for everyone. It's critical that older homeowners and their families get unbiased counseling and information when considering whether to tap into their biggest asset."

As the only national aging organization that provides reverse mortgage counseling, NCOA brings a unique approach to helping older homeowners examine all of their options when it comes to staying independent. HUD requires that all counselors use NCOA's free, confidential BenefitsCheckUp® service to determine if reverse mortgage clients are eligible for an array of benefits that could help them pay for everyday expenses like food, medicine, and utilities.

In addition, NCOA offers other tools to help older homeowners make the most of their home equity, so they can stay economically secure while maintaining their independence for as long as possible. These include:

Home Equity Advisor: Developed with a grant from the FINRA Investor Education Foundation, this website offers a free Quick Check for older homeowners who want to explore how they can use their home equity to meet their retirement goals and avoid scams.
Reverse Mortgage Counseling Services Network: NCOA's trained counselors help older adults understand the costs and features of different types of reverse mortgage and evaluate the pros and cons for their individual situation. They also discuss other options, including public and private benefits, which can help seniors stay independent longer. HUD has approved NCOA as one of nine reverse mortgage counseling intermediaries.

Free Reverse Mortgage Counseling for Seniors Seeking to Use Home Equity: NCOA offers free counseling for seniors through its Reverse Mortgage Counseling Services RMCS Network.

Insights, Analysis, and Developments

Editorial Note: Reverse mortgages, while offering financial flexibility to seniors, require careful consideration. It's crucial for homeowners to fully understand the terms and implications of such loans, seeking guidance from trusted sources and counselors to ensure these decisions align with their long-term financial well-being - Disabled World (DW).

Attribution/Source(s): This peer reviewed publication was selected for publishing by the editors of Disabled World (DW) due to its relevance to the disability community. Originally authored by National Council on Aging and published on 2013/01/23, this content may have been edited for style, clarity, or brevity.