What is Reverse Mortgage?
Having a home is one of the many rewarding things that we get in life. It is a place where we shape our families and it is filled with memories that lasts a lifetime. This has given you a lot over the years and even more with reverse mortgages.
A great number of Americans plan their retirement or even turn to alternative sources of post work income. But reverse mortgage is another option. When we talk about reverse mortgage, this is when someone pays you depending on the value of your home. There are many choices on how you want to receive the money – it can be in lump-sum, monthly payments or you can even receive a line of credit.
Naturally, you had to make mortgage payments when you purchased your home. When this happened, you decreased the amount of debt that you owe and increased the equity of your home. However, with reverse mortgage it is the complete opposite. Your debt increases and the equity of your home decreases. This is actually done when you want an extra source of income especially when you want to sell your home when you pass away. This will allow you to receive the equity of your home and enjoy it after retirement.
The amount that you will receive will depend on your age, current interest rates and the value of your home. After receiving the amount your home has been priced at by the lender, you will then owe that amount to him. The idea is to sell the home and repay the debt. Most of the time, this is done by an estate when the person passes away and still has debt. You do not have to pay the lender while you are still living in your home.
You have to meet with a financial advisor if you opt for this. Reverse mortgages can get complicated and has a lot of technical details. Like a regular mortgage, it has upfront costs and monthly service fees. On the other hand, all the money that you obtain from the lender is tax-free.