This section applies to you if you are at least age 62.
A reverse mortgage or reverse annuity mortgage allows you to receive a stream of monthly payments or have a line of credit from a mortgage company. This option allows cash-strapped elderly homeowners the opportunity to use some or all of the equity in their homes while they are still alive.
How it Works
The bank uses your home as collateral and makes monthly payments to you or establishes a line of credit that you can draw upon. The payments to you are based on your age, the home's value, interest rates, and your marital status. Unlike a conventional loan, you don't have to make payments to the bank. Principal, interest, and fees simply accrue against the home's value and are paid when you sell your home.
Generally, to qualify for a reverse mortgage:
IMPORTANT NOTE: Extreme caution should be exercised before implementing a reverse mortgage. Consider the following:
Once the reverse mortgage is in place, there are several different ways to tap into the money:
SUGGESTION: Whichever reverse mortgage option you choose, you can change options if your circumstances should change.
After the borrower moves or dies, the home is sold and the accumulated debt plus interest and any other closing fees come due and are paid from the sale of the home.
In a nutshell, elderly homeowners who don't have much of a retirement fund can live off the equity in their home while continuing to live in the home.