This is a special type of mortgage specifically for homeowners 62 and older designed to aid retirees with limited income to turn their home’s equity into cash to spend however they see fit (typically to help cover living expenses). Unlike traditional mortgages, reverse mortgages do not require the borrower to make monthly payments. Instead, the loan is repaid when the borrower no longer lives in the home. The loan balance will increase over time, and as it increases the home’s equity decreases. With most reverse mortgages, you can typically cancel the deal within 3 business.
Why get a reverse mortgage? They are a great alternative if you want to take advantage of your home’s equity, but don’t want to sell it or move, and you may not want an equity loan, which can be complicated.
Common pros of a reverse mortgage*:
- Flexible disbursement options
- Tax-free proceeds
- No Social Security or Medicare payments
- Able to live in the home with no monthly mortgage payments
- Heirs are not liable if the loan balance exceeds your home’s value
- After the loan is repaid, any remaining equity goes to the borrower or heirs
What are the qualifications for a reverse mortgage?
- Must be at least 62 years of age
- Must own the home outright, or have a mortgage balance that can be paid off using the proceeds from the reverse loan
- Must be able to continue to pay property taxes, insurance
- Must live in the home
- Must keep the home in good condition
TLDR; A reverse mortgage is borrowed money, interest, and monthly fees to equal a consistently rising loan balance which is typically paid off in full when the home is sold.
*These may not apply to all reverse mortgages, as each one is different. Check with your lender to see if these benefits will apply for you.
Homer Real Estate 