Responsible homeowners who have never even been a day late on mortgage payments and have decades of payments behind them can secured total equity in their homes. A reverse mortgage is a loan that taps into that equity and provides you with a portion of the value in cash. The great thing about a reverse mortgage is that you will not have to pay the money back until you no longer use the home as your primary residence.
If you are over 62 years of age and own your own home (or have a minimal amount of mortgage payments remaining) you qualify to take out a reverse mortgage. With this type of loan, the money does not have to be paid back until you sell your property, move out of your home or die (then your estate will handle the details of repayment).
The cash borrowed through the reverse loan process can be distributed in a number of ways based on your preference. You can choose from a lump sum of cash, monthly cash payouts, or as a credit line. A combination of payouts and a credit line is also available.
Are you considering a reverse mortgage as a way to pay for your retirement? AARP suggests contemplating a couple of questions to see if a reverse mortgage is right for you. Loan seekers should ask themselves:
- Do you really need a reverse mortgage?- They are typically costly and may not be the west way to borrow money to finance your dream.
- Can you afford a reverse mortgage?- Since the amount due grows larger every month because of compound interest; they are very expensive to pay off.
- Can you afford to start using up your home equity now?- If you spend it now the less you will have for future expenses and emergencies.
- Do you have less costly options-? AARP suggests using home equity loan or home equity line-of-credit as they cost less.
- Do you fully understand how these loans work?- these are unique loans the risks associate with them are unlike any others.
Before committing to this or any other type of loan, make sure to review all the terms of the agreement so you are well educated on what you are getting yourself into.
