Reverse mortgages are an atypical group of loans that allow older homeowners, over 62 years of age, to transfer part of their home’s equity into tax-free income without having to sell their home, give up their title, or take on a new monthly mortgage payment.
The reverse mortgage is aptly named as the normal payment stream, the homeowner paying the lender, is “reversed,” as the lender begins making payments to the homeowner.
There are certain eligibility requirements including that the home has to be a single-family home built after June 1976, or a qualified condominium or townhouse. Homeowners are eligible for a specific amount of money with reverse mortgages, which depend on several factors, including homeowner age, the type of reverse mortgage selected, appraised home value, current interest rates, and, in some cases, where you live. Generally, the older you are, the more valuable your home, and the less you owe on your home, the more money you will receive.
A lot of options are available with the money your receive from reverse mortgages. You can take out all the money at once in a lump sum, have fixed monthly payments for life, have a line of credit, or some combination of these three choices. Over 60 percent of borrowers choose to receive the payment as a line of credit that will allow you to draw on the loan at any time. The funds from a reverse mortgage are tax-free; it's your money, not additional income. A reverse mortgage does not affect regular Social Security or Medicare benefits.
|
