A reverse mortgage is a type of home loan that lets you take the equity of your home out as cash in regular monthly installments or as a lump sum. Basically, you’re getting paid the value of your home. You don’t repay these loans like traditional loans, in fact no payments are expected until you are no longer using the home.
To qualify for a reverse mortgage or to be considered an acceptable risk you usually have to fit most of if not all of the following requirements: applicants must be 62 years old or older, live in their own home, own the home outright or have a low balance due.
The benefits of a reverse mortgage are that they let you stay in your home and borrow against the equity when you need the money most (after retirement). You don’t have to worry about losing your home as long as you still live in it. Once you’ve left the home the loan will need to be repaid, usually by sale of the property. This may be your responsibility or fall upon your heirs once you’re deceased.
One thing to consider when getting a reverse mortgage is the future value of your home. Your equity is the key to a reverse mortgage and one that has a potential of rapid future increases will boost your equity while on the other hand, if you think your home’s value will decrease rapidly you would end up without much equity and with quite a large balance due at the end of your reverse mortgage.