Reverse Mortgage
1. What is a Reverse Mortgage?
A reverse mortgage is a special type of loan for homeowners, typically aged 62 or older, that allows them to convert a portion of their home's equity into cash. Unlike a traditional mortgage where you make payments to the lender, with a reverse mortgage, the lender makes payments to you.
You would retain ownership of your home and continue to live there. The loan is generally repaid when you sell the home, permanently move out, or pass away.
2. How Does a Reverse Mortgage Work?
To access the funds, you can receive the money in various ways.
You can choose to get a single, large payment upfront or monthly fixed payments over time. You can also choose to have a credit line and draw funds as needed, similar to a credit card or have a mixture of the options.
There is no monthly mortgage payments. You remain responsible for paying property taxes, homeowner’s insurance, and maintaining the home. Failure to do so can terminate your loan. Because you’re not making payments on your loan, interest accrues. The amount you owe on the loan will increase over time, which in return will reduce your home’s equity. However, you and those that will inherit your properties will never owe more than the value of the home at the time the loan is repaid, even if the loan balance exceeds the home’s value.
3. Who is a Reverse Mortgage For?
This program is designed for homeowners who are 62+ and have significant equity in their home. It is also helpful for individuals who need financial support to cover living expenses, healthcare costs, home repairs, or to pay off existing debts, but wish to remain in their home.
As a caregiver, if you are worried about how you would be able to afford your own house mortgage/taxes on top of your parents/family member expenses, this is something you can discuss with your family and see if they are interested. A reverse mortgage can be a valuable financial tool for eligible seniors, providing tangible financial support from their home equity while allowing them to age in place. If you are considering this as an option, please consult a professional to weigh the pros and cons before making your decision. You can learn more about the pros and cons at Federal Trade Commission Website linked below.