What is a Reverse Mortgage and How Do I Qualify?

There has been a lot of publicity lately about the availability of reverse mortgages, but many people do not understand what a reverse mortgage is or how one works. This article attempts to explain the basics of a reverse mortgage and if it may be a good option for you.

A reverse mortgage is a special option only available to senior's age 62 or older. With a reverse mortgage you are basically getting a loan based on the equity in your home. The main difference between a reverse mortgage and a traditional mortgage is that the reverse mortgage makes payments to you, instead of you making payments to a lender.

The equity that you have established in your home will continue to shrink as you accept payments from the reverse mortgage lender.

You can choose between receiving monthly payments and getting a large lump sum to cover large unexpected expenses. In fact, you can set up the amount and frequency of payments that you receive from the reverse mortgage in just about any way that will best suit you and your needs.

Unlike a traditional home mortgage, a reverse mortgage will continue to grow as you continue to take payments. Instead of the amount that you owe shrinking each month, the amount you owe will grow over time. You will also be required to pay interest on the reverse mortgage and lender fees.

The total amount that you can get from a reverse mortgage is based upon the market value of your home. The amount that you receive from your reverse mortgage will never exceed the market value of your house.

When do you have to repay the reverse mortgage?

You will have to repay the reverse mortgage, plus interest and lender fees, when you sell the house. Keep in mind that since the amount of the reverse mortgage is lower than the market value of your home, you should have no problem repaying the reverse mortgage in full once you sell your house.