What Is A Reverse Mortgage and Should You Get One As A Los Angeles Homeowner?

Older homeowners of retirement age who find that Social Security and savings just aren’t cutting it for them might consider a reverse mortgage. You do have to give up your home, but you get to remain in it. While a reverse mortgage can improve retirement, it does have some downsides – though these have less strength than formerly owing to some reforms in the past few years. So what is a reverse mortgage and should you get one as a Los Angeles homeowner?

What Is a Reverse Mortgage?

A reverse mortgage and a traditional mortgage are both loans backed by your home that have to be repaid to the lender. With a traditional mortgage, you get all the money upfront and repayment commences right away, payments being made monthly until it is paid off. With a reverse mortgage, on the other hand, you are using your home’s equity to get the loan. You get the funds in a lump sum or in monthly installments or as a line of credit. There no monthly payments, and you pay the loan off when you sell the house or die. Typically, a reverse mortgage is backed by the Federal Housing Administration (FHA) and overseen by the Department of Housing and Urban Development (HUD).

Reverse mortgages were designed specifically for older people, usually in retirement. A reverse mortgage allows them to use their home equity to augment their monthly cash flow. And it doesn’t burden them with monthly payments.

Who Can Get a Reverse Mortgage?

Qualifying borrowers must be a minimum of 62 years old. They must also submit to a home counseling session, the purpose of which is to ensure they fully understand everything it entails.

The home whose equity is used to back the loan must be a primary residence. Additionally, you aren’t allowed to borrow more than 80% of the home’s value. You still have to pay insurance, property taxes, and mortgage insurance, as well as continuing to maintain the home.

Reasons to Get a Reverse Mortgage as a Los Angeles Homeowner

If you need the money to survive at a decent level, that’s a good reason to get a reverse mortgage. Social Security doesn’t stretch very far, and a reverse mortgage can help fill the gap. And the income you receive from a reverse mortgage is often tax-free.

Also, you get to remain in your home even while receiving monthly payments. Other solutions for retirement funding often require that you sell your home in order to downsize or relocate to an area where you can live more cheaply.

So if money is the primary concern, a reverse mortgage may be for you as a Los Angeles homeowner.

Who Shouldn’t Get a Reverse Mortgage

As we mentioned, reverse mortgages do have certain drawbacks. And if these cons outweigh the pros for your situation, then a reverse mortgage may not be a good idea for you. Consider the following . . .

  • A reverse mortgage may not give you as much money as you actually need, depending on your age, your home’s value, the amount of equity, and other factors.
  • Just as with traditional mortgages, there will be closing costs, and interest rates are typically higher with reverse mortgages – which are added back into the loan balance. 
  • If for some reason you have to leave your home, it will probably have to be sold to pay off the loan. And this means you can’t leave your home to your children – unless you can figure out another way to pay off the reverse mortgage.
  • The reverse mortgage could damage your eligibility for other needed benefits, including SSI and Medicaid.


A reverse mortgage might be the ideal solution for you as a Los Angeles homeowner . . .  but then it might not be. You should carefully weigh the pros against the cons before making a decision. It’s also a good idea to consult both a financial advisor and a local real estate agent. While your agent can’t advise you on financial matters, she can help you understand how a reverse mortgage relates to and can affect your homeownership. Just be sure to consider all possible income alternatives. To find out more about reverse mortgages, contact us today at 562-881-9811.

Let us help you understand your options when considering a reverse mortgage in Los Angeles! Contact us today for more information! 562-881-9811

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