The concept of a reverse mortgage has actually been around since the early 1960s, and an estimated 70,000 reverse mortgage loans are taken out every year. If you are 62 or over, own your own home and want access to quick cash without having to make a payment every month, this type of loan may be for you.
The biggest advantage for most borrowers is that you don’t have to pay back the loan. A reverse mortgage is basically a home equity line of credit and is paid back after your death when the home is sold. It’s an easy and practical alternative to a more conventional home equity loan or line of credit. And because the loan is insured by the government, seniors taking out a reverse mortgage are protected in the event of a slump in the housing market.
Just like a conventional loan, the funds that you have access to with a reverse mortgage can be used for whatever you want – to renovate your home, put kids through college, take that trip of a lifetime, or apply towards insurance and healthcare costs. The money can also be accessed in different ways too, depending on your needs, either as a line of credit as and when needed, or paid in a lump sum.
There are no income requirements, and you don’t have to be in especially good health – a health exam or questionnaire isn’t needed to apply and is approved. And if your credit isn’t all it should be, another big advantage for many borrowers is that there are no credit requirements.
Many seniors understandably don’t want to leave their home, especially if they have lived there for most of their lives. A big benefit for many is that it avoids the need to move out of the home and into an assisted living facility or retirement home; the funds can then be used for in-home care.
As with any loan, it pays to make sure you understand what you are signing when you apply for a reverse mortgage. But if you are an older homeowner with equity in your home, it can be a practical financial solution.