If you're seeking a solution for managing your finances, you may be
interested in taking advantage of a reverse mortgage (may being the operative word here). A reverse mortgage is in many
ways exactly what it sounds like: a mortgage that works in reverse. More
specifically, individuals with a reverse mortgage don't make monthly payments
on their home as they would with a traditional mortgage; rather, individuals receive
money by converting their home equity into cash. A pretty good deal, wouldn't
you say?
Of course, not every homeowner can be eligible for a reverse
mortgage. You must be at least 62 years of age, your home must be your
primary residence, your mortgage must be paid in full, and your home must have accumulated
wealth since your original purchase. In other words, if your home has
depreciated in value over the course of your ownership, you likely won't be
eligible for a reverse mortgage. However, if over the years you've added an in-ground
pool, built a barn, remodeled your kitchen, or added a sun room, your home has
likely increased in value, and it's this equity that can be used to your
advantage. Reverse mortgages are intended to afford individuals with minimal
income the opportunity to cover basic costs of living and pay for medical
expenses. Recipients of a reverse mortgage do not have to repay their loan
unless their home is sold or abandoned; in most cases, this means that recipients
live out the rest of their lives without repayment.
As 321 financial expert
Jeremy Marcus points out, there are different types of reverse mortgages.
Those eligible can apply for Single-Purpose Reverse Mortgages, which are
available through state, local and nonprofit organizations and are usually the
most inexpensive types of mortgages. Homeowners can also apply for a Home
Equity Conversion Mortgage, which is backed by the U.S. Department of Housing
and Urban Development and which doesn't have any income requirements for
eligibility. These types of reverse mortgages are also more widely-available,
but typically have higher upfront costs. Additionally, money from these
mortgage payments can be used for any purpose. There are also Proprietary
Reverse Mortgages, which are available through private lenders and which can
guarantee 100% equity on your home, unlike Home Equity Conversion Mortgages.
Eligible homeowners will need to decide for themselves which type
of reverse mortgage makes the most sense for their needs. Many experts recommend
that homeowners only take out reverse mortgages if they still intend on staying
in their home for a significant amount of time, and reverse mortgages are never
recommended for those who wish to will their homes to family members upon their
death. Reverse mortgages aren't for everybody, but they can be incredible
opportunities for financial security for those that are eligible.
