What is a Reverse Mortgage and Why Would You Use One?

Published by julia | Filed under Buyer / Seller Tips, Miscellaneous, Real Estate, Shout Outs

A reverse mortgage is sort of a different kind of home equity loan that is designed to appeal to older home owners who want to keep their homes but who need to supplement their monthly income. It can be a good option for those who need the extra cash, but the interest rates on such mortgages can be expensive and the terms and conditions by which they come are unique, so it’s best to fully understand what you are getting into before signing on the dotted line.

First of all, a reverse mortgage is only available to people age 62 and above. This type of mortgage basically lets you use the equity in your home as monthly income, which is excellent if you have been in your home a long time, have built up a lot of equity, and the home is worth a decent amount of money. Your mortgage company will basically pay you a monthly payment based on the equity in your house, spread out over a number of years. The people who get these types of mortgages are usually people who have already paid off their homes.

If you are worried about foreclosure, you should know that you can never be forced out of your home with a reverse mortgage, because there will be no money for you to pay to the bank. It is a good option if you have very little savings and need money for unexpected bills like medical bills or if you need to get a new car. If this is the case, then the reverse mortgage will provide you with the monthly payments you need to take care of these things.

These mortgages are also best for people who plan to stay in their home for at least five years. Otherwise, you have to pay back the loan, and the cost of doing so might outweigh any financial benefits you get from selling your house. However, if you meet the specific requirements of people who need something like a reverse mortgage, then you may find that it provides you with exactly the type of financial help you need at the time you need it.