Reverse Mortgages: What Are They?

What are reverse mortgages and are they right for you? If you own a home which has equity - that is value above what you owe on the house in terms of liens, taxes, mortgages and other loans - then you may qualify for a reverse mortgage. A reverse mortgage is almost exactly what it sounds like, instead of you buying a house and lending money from the bank slowly paying it off, a lender slowly pays you money in the form of a loan that will have to be paid back either when you sell your house or upon your death (where the house will be sold by the bank)

Why get a reverse mortgage? lets say you own your home and do not owe anything on it, and you also just retired. If you get a reverse mortgage you can have a sizeable and steady income stream while still being able to live in your home without having to worry about selling your house nor worry about repaying a loan. you can now enjoy your retirement without any worries and travel the world should you choose.

Under the terms of some reverse mortgages your heirs can repay the loan on the reverse mortgage and keep the house should they choose. Be warned though, reverse mortgages usually carry with them many hefty fees which become part of the loan which interest is charged on against your house. If your heirs decide they want to keep your home they may be charged an amount that might seem unfair.

When you want a reverse mortgage your credit has little to no meaning. Because your home is the repayment, your ability to pay them cash does not matter. Because of this your personal credit history does not matter. The main thing that the reverse mortgage lender needs when creating your loan is the value of the equity of your home.

With reverse mortgages there are quite a few benefits such as tax free cash usable for any reason you want, You can keep the title of your house, your property can be sold any time you wish, there are many options of how you receive your payments, there are no income requirements or limits, there are no health requirements, there are no credit checks, your government aid such as social security are not affected. For the owner of the home there are very few down sides but should the heir want the home, the fees and higher interest rates of a reverse mortgage can be very hard to handle.

All in all should you have no heirs, or should you not care if they get the home you are getting the reverse mortgage with or not it can be a lie changing event which can make you have a worry free and fun retirement. But if you worry where your home will go after you pass away be warned reverse mortgages are not charities, but a means to make a profit.