Reverse Mortgage Basics
INTRODUCING Reverse Mortgages
Until recently, there were two main ways to get cash from your home. You would have to move or you could borrow against your home. If you borrowed against your home, you would have to make monthly loan repayments.
Now there is a third way of getting money from your home that does not require you to leave it or to make regular loan repayments
“REVERSE” MORTGAGES
A “reverse” mortgage is a loan against your home that you do not have to pay back for as long as you live there. With a reverse mortgage, you can turn the value of your home into cash without having to move or to repay a loan each month. The cash you get from a reverse mortgage can be paid to you in several ways:
- all at once, in a single lump sum of cash;
- as a regular monthly cash advance;
- as a “creditline” account that lets you decide when and how much of your available cash is paid to you; or
- as a combination of these payment methods.
No matter how this loan is paid out to you, you typically don’t have to pay anything back until you die, sell your home, or permanently move out of your home. To be eligible for most reverse mortgages, you must own your home and be 62 years of age or older.
OTHER HOME LOANS
To qualify for most loans, the lender checks your income to see how much you can afford to pay back each month. But with a reverse mortgage, you don’t have to make monthly repayments. So you don’t need a minimum amount of income to qualify for a reverse mortgage. You could have no income, and still be able to get a reverse mortgage.
With most home loans, if you fail to make your monthly repayments, you could lose your home. But with a reverse mortgage, you don’t have any monthly repayments to make. So you can’t lose your home by failing to make them.
Reverse mortgages typically require no repayment for as long as you — or any co-owner(s) of yours — live in your home. So they differ from other home loans in these important ways:
- you don’t need an income to qualify for a reverse mortgage; and
- you don’t have to make monthly repayments on a reverse mortgage.
