How reverse mortgages works

Print Friendly, PDF & Email


When someone takes out a regular (forward) mortgage, the borrower makes monthly payments to pay the mortgage down. With a Reverse Mortgage, if you are approved there are no monthly payments and the mortgage balance instead goes up.

Why would anyone what to get a reverse mortgage? First of all, not everybody can. It’s only available to borrowers who are 62 years of age or older. How much equity you can access is based on your age and how much your home is worth. It is very popular for seniors who have limited income and have very small mortgages or no mortgage at all. The money that you get out of a reverse mortgage could be used for day-to-day expenses, in-home care, traveling or just to create a cushion of money in case you needed it.

What is most important to know is that you can never be removed from your home. The reverse mortgage stops when the homeowners pass away. The heirs then have six months to sell the property and pay the mortgage off, after which any proceeds are distributed to the heirs.

There are a few different payment options for a reverse mortgage.

  • A monthly payment like an annuity for the rest of your life
  • A line of credit with a limit that a homeowner can access whenever they want
  • A lump sum of cash at closing along with an equity line available in Year 2 with a limit. This insures that the homeowner does not use up all their money within the first year.

Many people are against reverse mortgages because the closing cost are higher than a regular mortgage and also because having a mortgage that has a growing balance leaves less money for the heirs of the homeowners/seniors.

A lot of seniors are having a tough time with medical costs, prescriptions drug charges and just higher day-to-day living expenses. Reverse mortgages all seniors to access their equity and lead a more comfortable life.

To contact me, call 773-557-1000 ext. 15, e-mail or visit

About Ron Ricchio

Renato (Ron) Ricchio is president of Chicagoland Home Mortgage. He grew up in Westchester and attended St. Joseph High School and DePaul University, taking a job as a loan officer in the mortgage industry soon after graduating with a bachelor's in finance in 1991. He started his own company in 2001, which he operates today. He has been ranked in the top 150 loan originators in 2010 and 2011 by Origination News. Ron is happily married with three beautiful children. A board member of San Francesco Di Paola Society and the founder of Ricchio Family Toy Drive for Lurie's Children's Hospital, he enjoys cooking and spending time with family and friends.

Check Also

Documentary illuminates Sardinian supper for the dead

A few years ago, we featured a unique collection of videos available on Vimeo that …

Leave a Reply

Your email address will not be published. Required fields are marked *

Want More?

Subscribe to our print magazine
or give it as a gift.

Click here for details