While the concept of a reverse mortgage has been around for a while, they are less utilized as there are some misconceptions in the market. They may soon become a more popular option for many once one understands how to use this product to enhance their lives.
A reverse mortgage is quite simple: a borrower with enough home equity from the current primary residence will have options to receive monthly payments, take out a lump sum of money or combination of line of credit with a lump sum of funds depending on the value of the residence and their equity in the home.
To be eligible, one must be 62 years or older. The older the homeowner is, the larger loan he/she can obtain. If you were to choose receiving monthly payments, the monthly payments will be delivered as long as you live in this residence regardless the value of the home. The ownership of the residence will remain in your name, NOT the bank’s name. The loan will mature once the home is no longer being used as primary residence. If the owner passed away or moves out, the loan will need to be paid back by selling the home or refinance to take out the outstanding loan balance. No, you will not need to pay more than the house value at the time of sale.
An option worth considering is a reverse mortgage line of credit. This has become a popular option for homeowners. Unlike a home equity line of credit, or HELOC, a reverse mortgage requires no monthly payments; a homeowner can access to their home equity when they need it. The amount/line available increases as the homeowners get older which releases more funds for the homeowners if they need it. The loan will only grow if the funds are used or taken out.
With so many conditions, it’s no surprise that they’ve been dropping in popularity over the past few years.
Currently a reverse mortgage can be a good option for those who receive limited monthly income and wish to supplement monthly income by accessing the equity which they have built in their home.
