How Does a Reverse Mortgage Work?
When many Americans retire, they often find themselves in a situation where they’re house-rich and cash-poor. They’ve paid off most of their home, which is worth thousands and thousands of dollars, but don’t have enough money coming in to pay the bills. Selling doesn’t make sense because then they’d be stuck without a place to live. If you’re in this situation, you might be able to solve your problem with a reverse mortgage. This is a way to cash out your home equity without having to sell your house or move.
Taking out a reverse mortgage
To take out a reverse mortgage, you need to be 62 or older. You also need to have paid off most if not all of your existing mortgage. That’s where the money comes from. You’re cashing out the value of your house without actually selling the house. If you take out a reverse mortgage, you can keep living in your house and never have to make payments on the loan. The loan’s just secured by the equity you own in your house. When you apply, the lender will look at the value of your home and will tell you how much money you can get from a reverse mortgage.
Reverse mortgage payments
You can receive your reverse mortgage payments in a few different ways. First, you can receive a one-time payment to cash out the entire value of the reverse mortgage at once. You can also receive monthly payments over a set number of years or for the rest of your life. Another option is to get a line of credit secured by the reverse mortgage. This will let you take out money whenever you need it. Finally, you can set up a reverse mortgage with a combination of these payment options.
How a reverse mortgage ends
You don’t have to pay off the reverse mortgage while you’re alive. You and your spouse can continue living in your home without ever making a payment on this loan. When you die, your heirs can either pay off the loan to keep the house or the bank will keep the house as payment. You can also pay off the reverse mortgage loan yourself and then the house will be yours again. Most people just keep the money and let the bank take their house after they die.
You worked hard to reach retirement and pay off your house. You should be able to enjoy this hard work. With a reverse mortgage, you can boost your income without ever having to give up your home.