If you're a senior 62 years or older with equity in your home, you can supplement your retirement with a reverse mortgage.
This is basically where the lender pays the borrower instead of the borrower paying the mortgage to the lender.
You may be wondering how this works. Basically the lender will pay you either a lump sum or monthly payments determined by the value of the home and how old you are. The more valuable your home and the older you are, the more money you'll be able to get.
The reverse mortgage comes due at the end of the permanent occupancy of the senior in the home. When you move out of the home permanently, the reverse mortgage comes due.
One of two things may happen at that point in time. The home may be refinanced with a regular mortgage. This works well if the heirs or seniors decide they want the home to "stay in the family" or be able to have a say in who gets the home.
If the seniors or heirs decide to "walk away" at that point in time without arranging for refinancing with a regular mortgage, the lender or bank will take ownership of the home.
The reverse mortgage is a "non-recourse" loan which means that the amount due will not exceed the appraised value of the home.
Reverse mortgages require counseling by a 3rd party provider specifically so that seniors understand what the consequences are as well as the advantages of reverse mortgages. These 3rd party counselors are also required to explain alternatives for funding for seniors 62 & older as well.
Your local loan officer or mortgage broker that you communicate with on pre-qualifying or determining about how much you may get from a reverse mortgage will provide you a list of approved 3rd party counselors for you to visit with prior to committing to a reverse mortgage.
In addition to reviewing several options with you, the 3rd party counselors will make sure you understand what will happen to your home once the reverse mortgage comes due.
The nice part about all of this is that as long as you are the primary resident in your home, the loan will not be due. This means that until you permanently move out, the home still belongs to you. This will all be explained by both your loan officer as well as the counselor you'll work with on the reserve mortgage.
Many seniors choose to pay off the existing mortgage which can easily be done if the numbers work out and there is a lump sum remaining or monthly payments. In fact as a note to add to this reverse mortgage article is that you can usually elect to either accept a lump sum payment, take monthly payments or a combination of both.
