There are a lot of options for people who are seeking financing for major expenses, or even just living expenses as they get older. This is especially true for senior homeowners who have a lot of equity in their homes. One of these options is a reverse mortgage.

What is a reverse mortgage?

A reverse mortgage is similar to a second mortgage in that you borrow money based on the amount of equity you have in your home.   The difference is that instead of paying the lender, the lender pays you to live in your home!

How is a reverse mortgage different from a second mortgage?

It is different in that you receive the funds in payments, usually monthly, and are not required to pay back the loan as long as one of the borrowers lives in the home as their primary residence. It is also different from a second mortgage in that the value of your home is used as the determining factor in the amount of the loan, rather than your income. This is why it is often used by senior citizens and retired people as a means of paying for in-home medical care or nursing home care for a spouse or parent.

What do I need to know about reverse mortgages in Michigan?  

• The state of Michigan also requires that anyone taking out a reverse mortgage must have homeowner's insurance. 


• You must be age 62 or older.


• In Michigan, income from a reverse mortgage is not taxable, and it will not count against Medicare eligibility or benefits.   However, the added income can affect Supplemental Security Income and Medicaid.

How can I receive my payments from a reverse mortgage?  

There are five ways to receive payments:

• The tenure plan, which gives you equal monthly payments for as long as you live in the house. 


• Term, which is equal monthly payments for a predetermined amount of time. 


• Line of credit, which acts like a savings account.  The money is yours for you to use until it runs out.  


• Modified tenure, which gives you a line of credit, but also gives you monthly payments for as long as you live in the home.  


• Modified term, which also gives you a line of credit, but pays you monthly payments for a fixed period of time.   

Financial advisors in Michigan caution that you should carefully evaluate the open-ended nature of this type of loan.   For example, if you receive a certain amount of money every month, to offset the cost of living in Michigan, you have to discern whether that amount will go as far toward your expenses later down the line.