A reverse mortgage allows you to withdraw the equity in your home without the need to sell it or make monthly payments to repay a loan. This is the “reverse” of a conventional (or “forward”) mortgage where you would make monthly payments to your lender. With a reverse mortgage, your lender pays you in one lump sum, monthly payments, or sets up a line of credit to use at your convenience. The loan is repaid only when you sell your home, pass away, or move out of the property for more than 12 consecutive months.
You can receive your equity in one lump sum at the closing of the loan, establish a line credit to use at your convenience, receive monthly payments for the rest of your life, or a combination of the three. More details on distribution options can be found here.
You can use the cash payments you receive however you wish. Many choose a reverse mortgage to:
– Pay off an existing loan on the home;
– Supplement retirement income;
– Establish reserves for unforeseen expenses;
– Purchase long term care insurance;
– Home improvements;
– Pay off credit card debt; or
– Leisure and travel expenses.
Deciding whether or not go forward with a reverse mortgage is a big decision. If you are still learning about a reverse mortgage please review the Frequently Asked Questions section. There you can learn more technical aspects of a reverse mortgage and a more detailed explanation of the process.