A reverse mortgage is a home-loan program for homeowners at least 62 years of age. It allows borrowers to access the equity they have built up in their homes. It does not require a monthly payment on the principal or interest.
With a reverse mortgage, the lender makes payments to the borrower
Traditional mortgage loans are very straightforward:
- You qualify for a loan amount based on your credit rating and income.
- The lender calculates your monthly payment, including interest and principal, and you pay it for the next 15-30 years!
The new program is called a reverse mortgage for a reason. Instead of making monthly payments to a lender, the lender makes payments to the borrower! Reverse mortgage proceeds can be taken as a lump sum, a line of credit and/or you can choose to no longer make your monthly mortgage payment.
The way you use your home’s equity depends on YOUR life and your needs
- Your interest may be in reducing your monthly expenses.
- You may want to establish a line of credit to manage potential emergencies or fulfill lifelong dreams.
- You might be interested in using a reverse mortgage to downsize and purchase a new home.
- Perhaps you are an adult son or daughter looking for ways to help Mom and Dad.
With a reverse mortgage, there is no mandatory monthly repayment
Borrowers are not required to pay the loan back until the home is sold or vacated. Like any loan, interest will accumulate on funds that have been borrowed. If you do not plan on making periodic payments toward your reverse mortgage, the loan balance will grow.
Learn more about helping seniors thrive in retirement
The reverse mortgage program was first enacted in 1989, during the Reagan administration. Although there have been changes to the program over the years, the mission has remained the same. To help seniors thrive in retirement, with dignity, in their own homes. Let’s review some of the ways a reverse mortgage can help you!