In a reverse mortgage loan (also called a home equity conversion loan), borrowers of a certain age may use home equity for anything they need without having to sell their homes. The lending institution pays out money based on the equity you've built-up in your home; you receive a lump sum, a payment each month or a line of credit. The borrowed money doesn't have to be paid back until the borrower sells his home, moves away, or passes away. After your home sells or you no longer use it as your main residence, you (or your estate) are obligated to pay back the lending institution for the money you obtained from the reverse mortgage as well as interest among other finance charges.
The requirements of a reverse mortgage generally include being 62 or older, using the home as your primary living place, and having a small remaining mortgage balance or owning your home outright.
Reverse mortgages can be helpful for homeowners who are retired or no longer bringing home a paycheck and need to add to their fixed income. Interest rates may be fixed or adjustable and the funds are nontaxable and don't adversely affect Social Security or Medicare benefits. Your residence will never be at risk of being taken away from you by the lending institution or put up for sale without your consent if you outlive the loan term - even if the property value creeps under the balance of the loan. If you would like to find out more about reverse mortgages, please contact us at 760-547-2080.