What is a reverse mortgage?
It is a type of loan that allows homeowners to access their home equity and convert it into cash.
How does it work?
You borrow from a bank and pay back the money you owe in increments. That’s usually how a loan works. In this case, though, the reverse happens. The bank makes payments to the homeowner instead of the other way around. Payments can be made in a lump sum, monthly allowance, or line of credit, which makes it possible for the loan recipient to access the funds at any time. A combination of all three is also possible.
What are the requirements?
Reverse mortgages, also widely known as Home Equity Conversion Mortgage, are only available to homeowners 62 years old and above. Anyone younger than that might not qualify. In addition, the loan applicant must own the home. If the home isn’t fully paid for yet, then the mortgage must be low enough that proceeds from the loan will be enough to cover the cost, says Bankrate.
What are the benefits of the loan?
Like any loan, the mortgage provides seniors with an influx of cash they can use for sudden expenses. If they have emergency home repairs or urgent medical bills to pay for, then this mortgage can come in handy. It also offers home seniors with a way to supplement their income. Many seniors live off of their pension and benefits, and it can be financially difficult for anyone living on a set budget to cover emergency costs. With a reverse loan, applicants do not have to worry about income checks, too, making it an ideal option for those with a less than stellar credit history.
Depending on your situation, going for a reverse loan might be the right decision. Consult a financial advisor to know more about your options. Click here for more details.