Reverse Mortgage is a type of home equity loan that allows you to convert some
of the equity in your home into cash while you retain home ownership. Reverse
Mortgage works much like traditional mortgages, only in reverse. Rather than
making a payment to your lender each month, the lender pays you. Unlike conventional
home equity loans, most Reverse Mortgages do not require any repayment of principal,
interest, or servicing fees for as long as you live in your home. Funds obtained
from an Reverse Mortgage may be used for any purpose, including meeting housing
expenses such as taxes, insurance, fuel, and maintenance costs.
To qualify for an Reverse Mortgage, you must own your home. The Reverse Mortgage
funds may be paid to you in a lump sum, in monthly advances, through a line-of-credit,
or in a combination of the three, depending on the type of Reverse Mortgage
and the lender. The amount you are eligible to borrow generally is based on
your age, the equity in your home, and the interest rate the lender is charging.
Because you retain title to your home with a Reverse Mortgage, you also remain
responsible for taxes, repairs, and maintenance. Depending on the plan you select,
your Reverse Mortgage becomes due with interest either when you permanently
move, sell your home, pass away, or reach the end of the pre-selected loan term. The
lender does not take title to your home when someone passes away, instead your heirs must pay
off the loan. The debt is usually repaid by refinancing the loan into a forward
mortgage (if the heirs are eligible) or by using the proceeds from the sale
of your home.