What is a Reverse Mortgage?
Because you’re a senior, you should consider getting a reverse mortgage. Simply speaking, a reverse mortgage is a loan you can get if you’re 62 or older if you’ve paid off your mortgage already. The way it works is that you can borrow some of your home’s equity and count it as tax-free income.
What is a reverse mortgage in simple terms?
It’s basically the opposite of a mortgage, which is why it’s called a reverse mortgage. Instead of you paying a mortgage to the bank, they’re paying you.
There are several benefits to a reverse mortgage. The first is that you can continue living in your home while you’re receiving the money from the reverse mortgage. If you’re unsure about selling your home, or want to do so in several years, you can do this. However, once you do sell your home or permanently move out, you will have to repay the loan.
How Does It Work?
With a reverse mortgage, you might not actually be able to borrow the full value of your home. That’s because the amount you can borrow depends on several factors, such as interest rates, the age of the youngest borrower, the value of your home, and the limit of the HECM mortgage, which is $765,600.
This said, there are several ways you can get the money with a reverse mortgage. These options, if you have a variable-rate HECM, include:
- Equal monthly payments, as long as one of the borrowers or more live in the home as a primary residence
- Equal monthly payments that are agreed to be paid over a fixed period of time
- Line of credit that you can access until it has run out
- Fixed monthly payments and line of credit, agreed to be paid over a fixed period of time
- Fixed monthly payments and line of credit, agreed to be paid as long as one of the borrowers or more live in the home as a primary residence
However, if you have a HECM with a fixed interest rate, then you’ll get a lump-sum payment that’s disbursed one time. Whichever option you prefer, getting a reverse mortgage can be a great choice if you want supplemental retirement income or something to add to your savings.
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