If you are over the age of 62 and own your home outright, you might consider a special type of mortgage called a reverse mortgage. While you have to pay the lender each month with a traditional home mortgage, reverse mortgages allow you to receive a loan check from your lender each month. You can get an open-ended loan, which ends only when you move out of the house, or a loan for a specific period of time. If you’re considering a reverse mortgage, here are some more facts you should know:
1.) Reverse mortgages are only available to homeowners who are over the age of 62 and have already paid off their entire mortgage. If more than one person owns the house, the youngest owner must be over the age of 62.
2.) These types of mortgages become payable as soon as the last homeowner moves out of the home. If you sell your house or pass away, the reverse mortgage is immediately payable. In the event of your death, your heirs may have to pay it off to avoid losing the home to your lender.
3.) Three types of lenders offer reverse mortgages.
- - State and local government agencies may offer single-purpose reverse mortgages. This is the cheapest option.
- - However, the lender dictates what you can use the loan money for.
- - The federal government offers reverse mortgages for an unlimited amount of time and for whatever purpose.
- - Private insurers offer private reverse mortgages. This is often the most expensive option.
4.) There are four types of reverse mortgages to choose from. You can get a mortgage for a fixed period of time or for an indefinite period of time. You can also get a line of credit based on your home equity or a combination of credit and monthly loan checks.
5.) Federally funded reverse mortgages allow you to live in a nursing home for 12 months before the loan must be repaid.
- Getting a reverse mortgage can help supplement your income if you are on a fixed income. However, you need to know what the potential financial consequences are for you and your heirs before deciding what type of mortgage is right for you.