How Do Reverse Mortgages Work?

By the time you’ve reached the age of 62, odds are that you will probably stay in the home you are currently living in for the rest of your life. You may give it to your children, or another family member, but it’s usually unlikely that you will sell it and move again. Reverse mortgages were created for people aged 62 or over so that they can take the equity that has been built in their home, and use it as a source of income. This income is completely tax free, and instead of the home owner making monthly payments to a lender, the lender actually makes payments to the buyer/owner.

Reverse mortgages can be a great way to help supplement income for your golden years. There are several factors that are taken into account when it comes to determining how much money you will receive. Some of those include your age at the time of application, the appraised value of your home, current interest rates, and other items. Most of the time, the longer you’ve lived in your home and the older you are, the more money you can receive. Most homes qualify for reverse mortgages, and that of course includes single family homes, but townhouses and condominiums usually qualify as well.

Before you decide to take out a reverse mortgage, read the fine print carefully, and fully consider your finances. If you have a lot of equity built up in a high-value house, chances are a reverse mortgage would suit you. However, if you haven’t been in your home that long, or if you expect to need access to your equity in the future (such as for moving into an assisted living facility) a reverse mortgage may not be for you. Instead, you might look into smaller home equity loans, or perhaps even selling your home and moving to a smaller one.