Reverse Mortgage Basics
What is a reverse mortgage?
A reverse mortgage is a type of home loan that allows for you to turn your home's equity into cash. This equity, which is built up after years of making mortgage payments, can in turn be paid out to you through a reverse mortgage. You, as a borrower, can enjoy these proceeds however you wish. Repayment for this loan is not due until you decide to move, until the home is no longer your primary residence, or until you pass away.
WHO is a reverse mortgage for?
Reverse mortgages are for those 62 years old or older who wish to tap into their home’s equity. If finances are tight, a reverse mortgage can help by providing another source of income.
If you plan on living in your home well into retirement, and you either own your home outright or have a substantial amount of equity in your home, a reverse mortgage could be the right plan for you. You could use the proceeds as you wish for travel, home improvements, increased cash flow, to pay medical expenses or to pay off credit cards.
Who are reverse mortgages NOT for?
If you plan on moving primary residences in the near future, a reverse mortgage is probably not a good idea, as full payment is due as soon as you move. Additionally, when you pass away, full payment falls into the responsibility of the children, and most commonly this means selling the home to pay off the reverse mortgage. Because of this, if you prefer that your children will inherit your home, a reverse mortgage may not be for you.