How Does A Reverse Mortgage Work?

Millions of Americans have lines of credit, and many use that credit for every day purchases, emergencies, or needs that they simply can’t cover with cash. Rather than relying on a personal loan or another line of credit in an emergency, individuals should look into getting a reverse mortgage. Seniors have the ability to obtain reverse mortgages that give them access to cash when they need it, without having to rely on another type of credit. 

What is a Reverse Mortgage?

Reverse mortgages are loans that enable seniors who are at least 62 years old to borrow the money they need against the equity of their house. Typically, seniors can borrow up to the amount of the home equity. So, those who own expensive homes but are low on cash could get a reverse mortgage to take care of their needs.

Those who have retired and need cash can easily get it from a reverse mortgage, eliminating the need to take out personal loans, max their credit lines, and other shady ways of getting cash. One of the advantages of the reverse mortgage is that the individual does not have to pay back the loan until they decide to move, sell the house, or in the event of their death. The heirs would then be responsible for paying back the loan, and typically end up selling the house in order to cover the fees.

All in all, a reverse mortgage is a peculiar type of mortgage that can turn out to be of tremendous help for a lot of senior citizens who cannot longer afford to make a living, but still possess homes they are paying mortgages for.

To be eligible for a reverse mortgage, you need to be at least 62 years old, occupy the home as a primary residence, and either own your own home outright or only owe a small amount on your existing mortgage loan. This balance due can be paid off at closing with the proceeds from the reverse mortgage.

In general, a reverse mortgage is tax-free and has no income restrictions. Additionally, most payments from a reverse mortgage won't affect Social Security or Medicare benefits. In fact, many seniors use a reverse mortgage to supplement their Social Security and Medicare, allowing for more financial security. This is a beneficial type of loan for those over the age of 62 who find themselves in need of money for one reason or another. It’s important to research and determine whether this is the loan for you or not.