Reverse Mortgage
A reverse mortgage is a tool that allows you to take the equity out of your house without having to sell it or make payments. Like the name implies, a reverse mortgage is the reverse of a traditional mortgage. With a traditional mortgage, you make payments on your loan to the lender each month, increasing your equity and decreasing your debt. Eventually, if you stay in the home, you will own it free and clear.
With a reverse mortgage, the lender pays you instead, reducing your equity and increasing your debt (since the money is a loan against your home’s equity). You do not have to pay back the mortgage for as long as you live in the property. In order to qualify for a reverse mortgage, you must have a significant amount of equity in your home, and everyone on the title must be at least 62.
Reverse Mortgage – Considerations
Getting a reverse mortgage can be more appealing than selling a home containing a lifetime of memories or obtaining a traditional mortgage, which requires you to start making payments immediately, but it should not be done without careful consideration.
The costs associated with a reverse mortgage are typically higher than for other mortgages. Furthermore, since you are using some or all of your home’s equity, your heirs may inherit property with a large outstanding mortgage. Like with a home equity loan or line of credit, it is not recommended to get a reverse mortgage simply to finance vacations or other discretionary spending.
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