How Does a Reverse Mortgage Work?
Reverse Mortgages are a confusing product to many people. This uncertainty causes many people to shy away from these products without ever really looking into them. That being said, What is a reverse mortgage and how does it work? Many people are confused on how they work, so let’s help explain.
A reverse mortgage is a tool that helps seniors generate additional cash flow to help fund their retirement. Reverse mortgages tap into the equity of what is most likely a seniors largest asset, their home. People over 62 in America own a total of $9.2 trillion in equity in their homes. However, many seniors are frustrated due to the fact that they cannot access this money easily. A reverse mortgage can be a great tool for seniors to tap into this equity to help improve their lifestyle today.
How Can a Reverse Mortgage Help?
These Mortgages do not require you to make monthly mortgage or interest payments like typical forward mortgages do. That is replaced by a lump sum pay out, a monthly payout, a Line of credit, or a combination of all 3. A line of credit is a great way for seniors to access another bucket of money that can be used for a multitude of reasons. Some seniors like to get a line of credit and let it grow and use it as an in case of an emergency fund. Some borrowers pull from it while other assets they own are depreciating. This allows those accounts to recover before you take money out from there.
There are a few requirements for the borrower to be able to get a Reverse Mortgage:
- Be 62 years or older (55 in some instances)
- Live in the home as their primary residence
- Keep the home maintained (What does that mean?)
- Pay their property taxes and insurance in time