What is a Reverse Mortgage?
A reverse mortgage is a risk-free way of tapping into home equity without creating monthly payments and without requiring the money to be paid back during a person's lifetime. Instead of making payments the cash flow is reversed and the senior receives payments from the bank. A reverse mortgage,and the cash flow it may create can greatly alleviate many of the burdens and issues seniors face when they outlive their retirement. A Reverse Mortgage enables homeowners who are age 62 or older to convert their primary home equity into income without having to sell the home, give up title or take on a new monthly obligation. They have the option of taking the funds as a lump sum, a line of credit, monthly income or any combination.
A Reverse Mortgage may be the best answer for you if all of your retirement is invested in your home. A reverse mortgage is a special type of home loan that lets the homeowner convert the equity in their home into cash, while continuing to live in their home. The equity can be paid in three different ways. A reverse mortgage provides income that people can tap into for their retirement. The advantage of a reverse mortgage is that the borrower's credit is not relevant, and is often unchecked, because the borrower does not need to make any payments.
Interest rates are usually higher and are charged on a compound basis. More is charged because the lender won't be repaid until the loan pays off in the future. Interest rates can change based on changes in published indexes. But the more adjustable they are, the lower they start – so they give you larger cash advances. recently fixed rates have come into the mainstream.
Payment back to the lender is required only once, at the end of the loan, which in most cases is when the homeowner dies (or the last remaining homeowner in the case of co-owners), sells or no longer uses the home as the primary residence. Repayment is also required if the homeowner does not comply with the terms of the Reverse Mortgage. The requirements are paying real estate taxes, keeping u on home owners insurance, and general upkeep on the house.
A reverse mortgage can be a very complicated decision so AARP has set up a website which answers many questions. Do your resource then find a loan officer, someone local, who understands the loan and can answer your questions.
This is a site which constantly updates with articles about reverse mortgages.
You can get a free e book about reverse mortgages. 11 pages of pure information to help you.
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