When you first hear of a reverse mortgage, it is easy to become confused by the jargon that lenders use. These loans are quite complex, and finding out whether they are the best option for you takes a bit of research. The first step, however, is simply to learn more about what these loans are and how they work.
A reverse mortgage is a loan that is generally intended for seniors who need to supplement their Social Security or retirement savings. The loan is offered only to seniors who own their home outright or who have a low enough mortgage balance to repay their mortgage using the funds from the loan. The loan is paid as a line of credit, ensuring that the borrower can take funds as needed or it can be paid with scheduled payments as long as the funds remain available. The funds borrowed can never exceed the equity of your home.
Repayment of your reverse mortgage is not due until none of the borrowers are the primary occupants of the house. This means that even if you live in the home after funds are exhausted, your home cannot be taken away to repay the loan. The loan will simply become due at such time as none of the borrowers reside in the home.
When the loan becomes due, either you or your estate will be responsible for repaying the loan and any associated fees. If this is not possible, the home will be repossessed. It is important to understand this fact when considering such a loan.
A reverse mortgage can be an excellent way to supplement the cost of your retirement, provided that you understand all of the terms of the loan. As with any loan, it is very important to understand all terms fully and to ensure that you borrow from a reputable lender. When you understand how a reverse mortgage really works, it is easier to understand if it is the right loan for you.
