Why Should You Consider A Reverse Mortgage

Your home is probably the most expensive thing you own. The equity in your home is a valuable investment that represents security in your future. When you own your home, you have many options to use your home equity to take care of your financial needs. Many homeowners choose to refinance their mortgages when interest rates are low as a way to raise funds to pay off other bills or free up their monthly cash flow due to lower mortgage payments. Another option that many homeowners use is to get a home equity loan to build a cash nest egg and pay off other debt. Homeowners age 62 and older have another great opportunity to capitalize on their home equity. This option is a reverse mortgage and is designed to allow homeowners who have reached retirement age to generate an income stream based on the equity they have in their homes. Reverse mortgages explained Since reverse mortgages have only recently started to catch on with homeowners, there is a lot of confusion about what reverse mortgages really are. Only people aged 62 and over are eligible for reverse mortgages. When you get a reverse mortgage on your home, the mortgage lender actually pays the money to you instead of the other way around. The money you get through a reverse mortgage becomes tax-free income that you receive for the rest of your life. You do not have to give up title to your home or leave your home. When you take out a reverse mortgage on your home, you can choose to receive the proceeds in a lump sum if that's best for you. You can also set up the mortgage so that you receive monthly installments, or so that you can draw on the total amount as needed. Regardless of whether you have a conventional mortgage on your home or not, once you turn 62, you can take out a reverse mortgage. However, it is generally best to take out a reverse mortgage when you own your home free and clear, without a mortgage. You can only take out a reverse mortgage up to the amount of equity you currently have in your home, so the amount you owe on your home will be deducted from the total amount you could get through a reverse mortgage. Seniors typically look to reverse mortgages as a means to help them take care of the day-to-day expenses of life. You worked hard to pay for your home, so why not benefit from the equity in your home while living on a fixed retirement income. Of course, a reverse mortgage is still a mortgage. Once you move out of your home, or the home is sold, or the home owner dies, the reverse mortgage must be paid off. There is also risk associated with a reverse mortgage. In the event that the proceeds from the sale of the home are not at least as much as the mortgage owed, the homeowner or his heirs may be left with an additional balance to pay off.