Reverse mortgages (sometimes referred to as “home equity conversion loans”) enable older homeowners to tap into home equity without selling their home. The lending institution gives you money determined by the equity you’ve accrued in your home; you get a lump sum, a payment each month or a line of credit. The loan does not have to be repaid until the homeowner sells his residence, moves out, or dies. You or representative of your estate has to pay back the reverse mortgage funds, interest, and other finance charges when your property is sold, or you no longer live in it.
Most reverse mortgages require you be at least 62 years of age, have a low or zero balance in a mortgage and maintain the property as your principal residence.
Many homeowners who are on a fixed income and need additional money find reverse mortgages advantageous for their situation. Rates of interest may be fixed or adjustable while the money is nontaxable and doesn’t adversely affect Social Security or Medicare benefits. Your house is never at risk of being taken away from you by the lending institution or put up for sale against your will if you live past the loan term – even if the current property value dips below the balance of the loan.
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