Reverse Mortgages: the Facts
A reverse mortgage (sometimes referred to as a a home equity conversion loan), offers homeowners of a certain age the use of home equity for living expenses without having to sell their homes.
The lender gives you money determined by your home equity amount; you receive a lump sum, a monthly payment or a line of credit. The loan does not have to be repaid until the homeowner sells his home, moves out, or dies. You or representative of your estate has to repay the reverse mortgage loan, interest accrued, and other finance fees when your house is sold, or you are no longer living in it.
Who can Participate?
The requirements of a reverse mortgage normally include being sixty-two or older, using the home as your primary living place, and holding a low remaining mortgage balance or having paid it off.
Reverse mortgages can be helpful for homeowners who are retired or no longer bringing home a paycheck but have a need to add to their fixed income. Social Security and Medicare benefits won’t be affected; and the funds are not taxable.
Reverse Mortgages may have adjustable or fixed interest rates. Your lender cannot take away your residence if you outlive your loan nor can you be forced to sell your home to pay off the loan amount even if the balance grows to exceed property value.