Reverse mortgages are, in essence, a loan. A homeowner who is 62 years old or older may be able to borrow against the value of their home through the use of a reverse mortgage. These funds can then be paid out to the homeowner in one of a few ways, like with a single payment, through fixed monthly payments or even through a line of credit.
Reverse mortgage loans are not due until the homeowner dies, sells the home or moves away permanently. At that point, the balance of the loan is due. Interestingly, federal regulations have made it a requirement that lenders don’t allow the loan to exceed the current value of the home. The borrower’s estate will also not be liable for the difference if the home’s value falls for any reason.
What are some benefits of reverse mortgage loans?
There are a few significant benefits to taking out a reverse mortgage. One is that it provides cash to seniors who may not have access to their true net worth due to the net worth being tied up in the home’s value.
Most reverse mortgage loans are federally insured. On top of that, the loan is secured with the home as collateral. When the individual moves out, dies or sells the home, the mortgage is due. If the individual died or moved away, they could, in essence, give up the home in exchange for the funds that they already received.
Reverse mortgages can be tricky. If you have an interest in them, make sure you understand the legal implications before you choose to agree to move forward with the loan.