A Reverse Mortgage is a special type of home loan that lets a homeowner that is at least 62 years old convert the equity in his or her home into cash. The equity built up over years of home mortgage payments can be paid to the homeowner in a number of ways: in a lump sum, in a stream of payments, or as a supplement to Social Security or other retirement funds. But unlike a traditional home equity loan or second mortgage, with a reverse mortgage repayment is not required until the borrowers move out permanently.
- Using your home equity, this program allows you to receive tax-free income. The income from this loan is not taxable and does not affect your Social Security or Medicare benefits.
- The amount of money available depends upon the value of the home, the borrower's age and the current interest rate. Older borrowers receive a larger percentage of the home's value than younger borrowers.
- Only one payment is required, when the home is sold or the homeowner moves away or passes away. Paying down the loan is permissible without penalty.
- There are no income or credit qualifications.
- Title to the home remains with the homeowner. Remaining equity belongs to homeowner or their estate.
In the meantime you have all the benefits of maintaining home ownership. In contrast to other types of loans, no repayment is required as long as you remain in your home. Since your home is probably your largest single investment, it's smart to know more about reverse mortgages, and decide if one is right for you.
