What exactly are “equity funds” from a reverse mortgage?

One of the primary features of a reverse mortgage is the ability to convert a portion of your home’s equity into tax-free1 cash. The amount of money you can access is based on three factors: your age, your interest rate, and the value of your home. Your age and interest rate generate a percentage, which is then applied to your home’s value. After any lien payoffs (like your existing mortgage) and loan costs are deducted, you receive your equity funds!

Equity funds can be disbursed through a line of credit, monthly installments, or a lump sum, depending on which reverse mortgage product you choose. You can also refinance your reverse mortgage! As your home value goes up, and you get older, your percentage increases, making more money available to you.

Our borrowers use their home equity funds in many ways! Among the most common are paying off credit card debt, upgrading their home or doing home modifications, purchasing a vacation home or investment property, traveling, starting a college fund for grandchildren, paying for a child’s wedding, and starting a small business. However, these funds can simply be kept as a safety net or used as cash each month.