What are some of the unique features of a reverse mortgage? A reverse mortgage is a “non-recourse loan”, meaning that the borrowers have no personal liability for the loan, so responsibility for repayment is transferred from the borrower to the home. Since the home itself is the collateral used for satisfying the debt, neither the borrowers, their heirs or the estate can ever get a bill at the end for any mortgage balance due.

A reverse mortgage always results in improved cash flow, and cash flow is one of the primary challenges in retirement. With sufficient equity, senior homeowners have flexibility in how they receive the loan proceeds. For instance, they can take a lump sum cash payment at closing, which can be invested or spent any way the homeowner chooses. They could also opt for a term payment for a specific number of months, at a targeted monthly payment amount, for the purposes such as delaying social security in order to increase their monthly payments later on.

Another alternative is a “tenure” or permanent monthly payment to the homeowner every month, for as long as they live in the home as their primary residence, pay their property taxes and homeowner’s insurance on time, and maintain their home. Finally, a senior homeowner could start a reverse line of credit, with the unique feature that the untapped, available balance grows at the note rate plus ½%... with the result that the available line of credit to draw on can get significantly larger over time.