How does a Reverse Mortgage work?

Whether seeking money to finance a home improvement, pay off a current mortgage, supplement their retirement income, or pay for healthcare expenses, many older Americans are turning to reverse mortgages. They allow older homeowners to convert part of the equity in their homes into cash without having to sell their homes or take on additional monthly bills.

In a regular mortgage, you make monthly payments to the lender. But in a "reverse" mortgage, you receive money from the lender and generally don't have to pay it back for as long as you live in your home. Instead, the loan must be repaid when you die, sell your home, or no longer live there as your principal residence. Reverse mortgages can help homeowners who are house-rich but cash-poor stay in their homes and still meet their financial obligations.

To qualify for most reverse mortgages, you must be at least 62 and live in your home. The proceeds of a reverse mortgage (without other features, like an annuity) are generally tax-free, and many reverse mortgages have no income restrictions.

Three Types of Reverse Mortgages

The three basic types of reverse mortgage are: single-purpose reverse mortgages, which are offered by some state and local government agencies and nonprofit organizations; federally-insured reverse mortgages, which are known as Home Equity Conversion Mortgages (HECMs), and are backed by the U. S. Department of Housing and Urban Development (HUD); and proprietary reverse mortgages, which are private loans that are backed by the companies that develop them.

Single-purpose reverse mortgages generally have very low costs. But they are not available everywhere, and they only can be used for one purpose specified by the government or nonprofit lender, for example, to pay for home repairs, improvements, or property taxes. In most cases, you can qualify for these loans only if your income is low or moderate.

Loan Features

Reverse mortgage loan advances are not taxable, and generally do not affect Social Security or Medicare benefits. You retain the title to your home and do not have to make monthly repayments. The loan must be repaid when the last surviving borrower dies, sells the home, or no longer lives in the home as a principal residence. In the HECM program, a borrower can live in a nursing home or other medical facility for up to 12 months before the loan becomes due and payable.


Yelp Reviews
"Derric does beyond! When I started looking for my first home with a small budget and not sufficient credit score, he looked for all possible options. In addition, I was a picky buyer, (I still am today), I took about 2 years to get one. He was beyond helpful in my loooong home search! Even after the purchase is closed his support is continued and I got a great refinance few yrs later."

Virginia C. San Diego, Ca

"Purchased my first single family home with Derric's help in November 2015 with a VA 30 year fixed loan at a very low rate and great terms. The terms and rate were better than the USAA and Navy Federal loans I had been researching. It was refreshing to deal with someone honest and straightforward. Derric was always available and his turn around on paperwork is appreciated."

Jered S. San Diego, Ca

"As a real estate agent, it's important for me that my homebuyers and refi clients are taken care of. I've worked with other loan officers but nobody can match the kind of service Derric gives to my clients. He goes out of his way to make sure my clients understand the process and status so my clients can make better decision. On top of that, he is pretty honest and will tell you the truth of where your loan stands, no sugar coating."

Jane M. San Diego, Ca

"Derric helped with my home loan and did a great job. I had to do two separate loans and he coordinated them to perfection and the deal closed on time with no problems. I now own my very first home and am just thrilled. Dealing with big banks is a major hassle and Derric had it under control the whole time and dealt with every hassle that the bank threw at him. I would definitely use him again and highly recommend him. Awesome guy."

Stephen B. San Diego, Ca

C2 Financial - San Diego Home Loans

With over 65 years experience in the mortgage industry C2 Financial has some of San Diego's top mortgage consultants, and Derric is one of their best. In 2016, C2 closed more than 2.5 billion in home loans and is rated top 50 mortgage companies to work for by Mortgage Executive Magazine.