We all know about mortgages. But what about reverse mortgages? These unique options are available to people later in life, as an option to save their retirement fund or limited income.
Reverse mortgages are only available to those age 62 or older. While the intent is to allow borrowers to use their accumulated wealth to pay for living expenses or health care, there is no regulation on how the money can or cannot be used.
But how does it work? According to ReverseMortgage.org, “A reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash…The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower. The borrower is not required to pay back the loan until the home is sold or otherwise vacated. As long as the borrower lives in the home he or she is not required to make any monthly payments towards the loan balance.”
While borrowers are residing in the home, they must remain current with property taxes, insurance, HOA fees, etc. The home is used as collateral, and the reverse mortgage must be the only lien. All other mortgages must be paid off before taking out a reverse mortgage.
Interested in possibly taking out a reverse mortgage? The National Reverse Mortgage Lenders Association is made up of individuals willing to help you understand and help fund any possible loans.