Understanding Reverse Mortgages: What You Need to Know

A reverse mortgage can be a helpful option for seniors, but it’s important to consider it a last resort. It’s best for homeowners who need extra income and want to stay in your home as long as possible.

What is a Reverse Mortgage?

A reverse mortgage lets you borrow money using your home’s value as collateral. To qualify, you must be 55 or older and have paid off your current mortgage or other loans on the home. You can borrow up to 55% of your home’s value, and the money can be given to you as a lump sum or in regular payments.  

You don’t have to make monthly payments like a regular mortgage. Instead, the loan gets paid back when you move out of the home, pass away, or stop meeting the loan’s terms. Keep in mind that reverse mortgages usually have higher fees and interest rates than regular mortgages.  

The big benefit of a reverse mortgage is that you can turn part of your home’s value into cash without having to sell your home. You don’t have to pay monthly bills, which can help you manage your budget.

How Does a Reverse Mortgage End?

A reverse mortgage usually ends in one of three ways:

1.When you pass away: If you’re married or co-own the home, the loan is due when the last homeowner passes away. Your family can sell the home to pay off the loan, but if they want to keep the house, they can pay off the loan with other money.

2.When you sell your home: If you decide to sell your home, the reverse mortgage must be repaid. You’ll have time to pay it back—usually 180 days, depending on the lender.

3.When you move to a care facility: If you move into a retirement or long-term care facility, you may have up to a year to pay back the loan, but be sure to ask your lender about the exact timeline.

What About Your Heirs?

Many people worry that taking out a reverse mortgage means there will be no inheritance left for their family. When you pass away or sell the home, your heirs have two options: they can sell the home, pay off the loan with the sale proceeds, and keep whatever is left, or they can pay off the loan using other money and keep the home.

If you are considering a Reverse Mortage let's talk about the options the advantages and the disadvantages.