How Do Reverse Mortgages Work?
If you’re like most Americans, chances are you are well-educated with the in’s and out’s of home mortgages, but have you ever heard of a reverse mortgage? These are becoming quite a popular option for the over 65, senior citizen crowd. Is a reverse mortgage a good option for you? Or is it more risk than you are willing to take on in such a critical stage of your life? Read on for a look at everything you need to know about reverse mortgages and see if it is right for you.
What is a Reverse Mortgage?
A reverse mortgage is a feasible option to citizens age 62 and older who own their homes. A reverse mortgage can be used to finance a home repair and allows you to convert your home equity into monthly income. While a standard mortgage requires you to pay a certain amount per month on your home purchase, a reverse mortgage allows senior citizens to receive a monthly payment from their equity. Reverse mortgages are valid while you are living in your home. If you move or pass away, the bank considers the reverse mortgage paid.
Is This a Smart Option?
This is a very smart option for many senior citizens. Without a full time job, income can be hard to come by for seniors. A reverse mortgage is an excellent option if you plan to reside within your home for a while, and want to turn some of your equity into an additional source of income.
What Options Do I Have?
There are three different types of reverse mortgages available to choose from. Single purpose reverse mortgages are offered by some state and government agencies. Federally insured reverse mortgages are offered by the United States Department of Housing and Urban Development. Proprietary reverse mortgages are handled by private institutions. Each reverse mortgage has different terms and requirements, so you will want to shop around to make sure you are selecting the right one for you.
The Bottom Line
A reverse mortgage can be a smart option for seniors to earn back some of their equity to help meet monthly expenses, medical bills or even a home renovation project. It is important to weigh the pro’s and the con’s before taking the plunge into a reverse mortgage. Each person’s financial needs are different. Make sure that you are making the right choice for your home and your future.