What's Hot: DC Can't Afford to Increase the Homestead Deduction | Luxury in the Heart of Adams Morgan
First-Timer Primer: The Do’s (But Mostly Don’ts) of Reverse Mortgages

The commercials urging senior citizens to look into reverse mortgages are ubiquitous. But what exactly is a reverse mortgage, who qualifies for one, and is it a good idea? In this First-Timer Primer, UrbanTurf answers those questions.
The Big Idea
A reverse mortgage lets a homeowner aged 62 and older borrow against the equity they’ve built on their home. So essentially, it’s a loan against the value of your house. These loans, which often come with no income restrictions but can carry very high fees, are repaid when you sell the house, move or pass away. The home has to be a primary residence to qualify for a reverse mortgage.
The loan may be particularly attractive to retirees because it draws on an asset that’s otherwise unusable unless sold, and because the proceeds from the loan are usually tax-free.
Types of Reverse Mortgages
There are three types of mortgages available to borrowers.
- Single-purpose reverse mortgages:
These loans are usually the least-risky and least-expensive option, but the funds are limited to those with low or moderate incomes and can generally only be used to repair a house, make an improvement or pay off property taxes.
- Proprietary reverse mortgages:
These are private loans secured by a private lender — and the ones you often see advertised on TV.
- FHA home equity conversion mortgages, or HECMs:
HECMs, or federally-insured home equity conversion mortgages, are by far the most common type of reverse mortgage. They’re backed by the Department of Housing and Urban Development.
Ways to Receive Money
According to the Federal Trade Commission, there are a few ways to receive the loan money:
- Fixed, monthly cash advances over a particular period of time;
- fixed, monthly cash advances for as long as you live in the house;
- a line of credit you can draw from when needed;
- and a combination of payments and credit.
The Pros of Reverse Mortgages
- The money can come in installments and be used to help retirees pay their bills with non-taxable funds. They also typically don’t affect the disbursement of Social Security or Medicare funds.
- You’re typically signing an agreement that will never allow you to owe more on your home than it’s worth.
The Cons of Reverse Mortgages
There are typically more cons than pros when it comes to reverse mortgages.
- They’re expensive. Be ready to pay very high lender fees, plus all the things you’d typically need to buy a house, including an appraisal, credit report, title insurance and other fees. AARP strongly recommends that seniors considering a reverse mortgage first look into a home equity loan or home equity line-of-credit.
- You’re taking a big risk. If you aren’t planning on staying in your house for a while, the high costs of the loan will almost certainly not be worth it. This can be especially complicated by unanticipated health issues.
- You’re essentially taking money from your estate. Your heirs won’t be able to stay in your home before repaying the loan.
- You may not understand what you’re signing. These mortgages are often extremely complicated, and some lenders are less than scrupulous in detailing the risks of the loans to potential borrowers.
See other articles related to: reverse mortgages, first-timer primer
This article originally published at https://dc.urbanturf.com/articles/blog/first-timer_primer_the_dos_but_mostly_donts_of_reverse_mortgages/9715
Most Popular... This Week • Last 30 Days • Ever

Following news that the retail outlet is replacing Best Buy in Tenleytown, UrbanTurf ... read »

For the first time in years, the spring housing market looks to favor buyers. ... read »

Nearly six months after a PUD was approved for two of the last remaining Waterfront S... read »

Cutting off Purple Line construction funds to spite late-night rail service; where to... read »

This week’s Best New Listings includes an ample Victorian near H Street, a cute cot... read »
DC Real Estate Guides
Short guides to navigating the DC-area real estate market
We've collected all our helpful guides for buying, selling and renting in and around Washington, DC in one place. Visit guides.urbanturf.com or start browsing below!
First-Timer Primers
Intro guides for first-time home buyers
Northern Virginia
Profiles of 14 neighborhoods across Northern Virginia
Ballston
Looking to Give People A Reason to Stay Past 6pm
|
Clarendon
Happily Straddling the Line Between City and Suburb
|
Columbia Pike
Arlington’s Neglected Stepchild is Getting a Makeover
|
Crystal City
Turning Lemons into Lemonade
|
Lyon Village
Developing An Air of Exclusivity?
|
Rosslyn
Hitting Its Growth Spurt
|
Shirlington
An Urban Village Hitting Its Stride
|
Del Ray
Virginia’s Small Town Near the Big City
|
Eisenhower Avenue
The Vibrancy Might Take a Few Years
|
Huntington
The Quiet Neighborhood By the Beltway
|
Old Town
Mayberry By The Potomac
|
Parkfairfax
132 Commerical-Free Acres
|
Downtown Falls Church
Staying the Same in the Midst of Change
|
Tysons Corner
Radical Change Could Be On The Way
|
Maryland
Profiles of 14 neighborhoods in suburban Maryland
Annapolis
Small-Town Living in the State Capital
|
Bethesda
Bedroom Community Gets Buzzing Cache
|
Cabin John
In With The New While Maintaining the Old
|
Chevy Chase
Affluence, Green Lawns and Pricey Homes
|
Downtown Silver Spring
Experiencing a Resurgence After a Bumpy History
|
Potomac
A Suburb on Steroids
|
Rockville Town Square
Despite the Dynamism, Still Somewhat Generic
|
Takoma Park
More Than a Little Bit Quirky
|
Wheaton
A Foodie Magnet on the Verge of Change
|
Capitol Heights
Kudzu, Front Porches and Crime
|
Hyattsville
Glass Half Full or Half Empty?
|
Mount Rainier
Artists, Affordable Homes and A Silo Full of Corn
|
National Harbor
A Development Rises Next to the Potomac
|
Riverdale Park
A Town Looking For Its Identity
|
Northwest DC
30+ neighborhood profiles for the city's biggest quadrant
16th Street Heights
DC's Sleeper Neighborhood
|
Bloomingdale
Where (Almost) Everyone Knows Your Name
|
AU Park
One of DC’s Last Frontiers Before the Suburbs
|
Brightwood
DC’s Northern Neighborhood on the Cusp
|
Burleith
DC’s 535 House Neighborhood
|
Cathedral Heights
Do You Know Where That Is?
|
Chevy Chase DC
Not to Be Confused With the Other Chevy Chase
|
Cleveland Park
Coming Back After A Rough Year
|
Columbia Heights
DC’s Most Diverse Neighborhood, But For How Long?
|
Crestwood
An Island of Serenity East of the Park
|
Dupont Circle
The Best of DC (For a Price)
|
Foggy Bottom & West End
Where the Institutional Meets the International
|
Forest Hills
Ambassadors and Adventurous Architecture
|
Foxhall Village
350 Homes Just West of Georgetown
|
Friendship Heights
A Shopping Mecca With a Few Places to Live
|
Georgetown
History, Hoyas and H&M
|
Glover Park
One of DC’s Preppier and More Family-Friendly Neighborhoods
|
Kalorama
A Posh View From Embassy Row
|
LeDroit Park
A Quiet Enclave in the Middle of the City
|
Logan Circle
Trendy Now, But Not By Accident
|
Mount Pleasant
Sought-After Homes Surround Main Street in Transition
|
Mount Vernon Triangle
From Seedy to Sought-After
|
Palisades
The Long, Skinny Neighborhood at the City’s Northwest Edge
|
Park View
It’s Not Petworth
|
Penn Quarter/Chinatown
DC’s Go-Go-Go Neighborhood
|
Petworth
Getting a Vibrancy of Its Own
|
Shaw
The Duke’s Former Stomping Ground
|
Shepherd Park
DC’s Garden of Diversity
|
Spring Valley
A Suburb With a DC Zip Code
|
Takoma
Not To Be Confused With Takoma Park
|
Tenleytown
Not Quite Like Its Neighbors
|
U Street Corridor
The Difference a Decade Makes
|
Woodley Park
Deceptively Residential
|
Adams Morgan
No Longer DC’s Hippest Neighborhood, But Still Loved by Residents
|
Southwest DC
The little quadrant that could
Southwest Waterfront
A Neighborhood Where A Change Is Gonna Come
|
Northeast DC
Profiles of 10 neighborhoods in NE
Brookland
New Development Could Shake Up Pastoral Peace
|
Deanwood
A Little Bit of Country Just Inside the District’s Borders
|
Eckington
Not to Be Confused With Bloomingdale
|
Fort Totten
Five Years Could Make a Big Difference
|
H Street
A Place To Party, and To Settle Down
|
Langdon
The Northeast Neighborhood That Few Know About
|
Michigan Park
A Newsletter-On-Your-Doorstep Community
|
NoMa
Evolving from a Brand to a Neighborhood
|
Rosedale
Ripe for Investment Right About Now
|
Trinidad
The Difference 5 Years Makes
|
Woodridge
Big Houses, A Dusty Commercial Strip and Potential
|
Southeast DC
6 neighborhoods from Capitol Hill to East of the River
Capitol Riverfront
Still Growing
|
Hill East
Capitol Hill’s Lesser Known Neighbor
|
Congress Heights
Gradually Rising
|
Hillcrest
Notable for Its Neighborliness
|
Historic Anacostia
Future Promise Breeds Cautious Optimism
|
Eastern Market
A More European Way of Living
|
Off the Beaten Turf
Overlooked parks, shops, cafes, and miscellany throughout DC
Unique Spaces
Awesome and unusual real estate from across the DC Metro