Two types of mortgages allow you to get money out of the value of your home while you own it. If you want to pay for college tuition or make home improvements, a home equity loan may be a great fit for you. However, if you're over the age of 62, a home equity loan may be an undue burden, as paying off a mortgage is probably not in your plans. A reverse mortgage may be the solution for you, though. It works similarly to a home loan or home equity loan, but in reverse.
A reverse mortgage is a special kind of loan that works in reverse to pay you rather than the lender or mortgage company. You can use the funds from this mortgage for home improvements, medical bills, food, everyday expenses, and anything else you'd like to spend it on. Although it sounds too good to be true, restrictions do exist. First, you must be 62 or older in order to qualify. Your medical status and financial status will not affect obtaining a reverse mortgage, but any other mortgages or home loans you have must be paid first after you begin to receive the funds from the reverse mortgage. Also, bankruptcy is a factor in getting a reverse mortgage. It's a good idea to research this process well before you invest money into obtaining one.
If you do decide to pursue a reverse mortgage, you will need to get mortgage quotes from lenders who offer this program to make sure you're getting the most money from your property. Reverse mortgages are calculated from the value of your home. You can receive the money in one lump sum at the beginning of the mortgage's term, or you can draw upon a line of credit, withdrawing money as you need it.
You must receive counseling on reverse mortgages in the U.S. so that the lender and government know that you understand the process. In order to "pay off" the reverse mortgage, the house must be sold or paid off when you pass away, move out of the home, or move into an assisted living facility. This may be a good option for some seniors, but if you are hoping to pass your home onto your children or someone else, a reverse mortgage will not be a good option for you. As reverse mortgages are a serious decision that will affect your home's future and what happens to your property after you pass away or are unable to live in it anymore, you should discuss its benefits and disadvantages with your family and anyone who will be caring for you and your finances now and dealing with your affairs after you pass away or can no longer handle them. Discussing this with a qualified lending professional is also a good idea, to see what sort of financial options you have if you need financial assistance.