A reverse mortgage allows a homeowner to receive a lump sum or regular payments from a lender, based on the amount of equity they have in their home. These mortgages are only available to people over a certain age, usually between 60 and 65, and if there are two borrowers, eligibility is based on the younger of the two.
Advantages of a reverse mortgage
- You don't have a monthly payment on a reverse mortgage.
- The amount you owe never exceeds the value of your home.
- Fees and interest are usually financed in the loan, so you don't pay upfront.
- They offer some flexibility as a retirement tool.
Disadvantages of a reverse mortgage
- The closing costs, insurance, and origination fees are usually higher than other mortgage types.
- The loan is due if you move away from your home.
- You can't pass your home on to children or grandchildren
Is it right for you?
A reverse mortgage is a good option for people who:
- have spoken with a financial advisor on how to use the mortgage strategically
- are planning on staying in their home
- don't care about keeping their home in the family after they pass away