What is a Reverse Mortgage?
It can be difficult enough trying to decipher a standard mortgage, but then in comes the reverse mortgage. As the name suggests, with a reverse mortgage instead of making a monthly payment to a lender the lender will pay you. It can be a viable way of paying off bills or financing your retirement, but entities like the FTC and consumer advocate groups agree that there is certain reverse mortgage information every person should know.
What is a Reverse Mortgage?
How does a reverse mortgage work? Essentially it is an agreement in which a lending company loans a homeowner money based on the equity in their home. The payments will keep coming until you no longer live in the home. At that point the reverse mortgage loan must be repaid.
Before using a reverse mortgage keep the following in mind:
- You must be 62 or older to qualify for a reverse mortgage.
- Typically the money is tax-free.
- There are three types of reverse mortgages: single-purpose reverse mortgages, federally-insured reverse mortgages and proprietary reverse mortgages.
- They shouldn’t affect your Social Security or Medicare payments.
- You will maintain the title of your home.
- You won’t have to make monthly payments.
If you are considering this option it’s vital that you do a lot of research first. You can use a reverse mortgage calculator to determine an estimate for the fees involved, amount of credit you’re likely to receive and more.
