Reverse mortgages are often used by homeowners over 62 years of age. This mortgage program is a way for seniors to tap into the home equity and remain in their homes.
With a reverse mortgage, there are no monthly mortgage payments, but homeowners are still responsible for paying property taxes, insurance, and maintenance.
To qualify for a reverse mortgage, you must own the home, be at least 62 years old, and have built up equity. The loan works by the lender making payments to the borrower until after homeowner passes away, sells the home, or moves out. This is possible because the equity in the house is used for the payments.
Advantages of Reverse Mortgages
- The homeowner can continue to live in the home
- Proceeds of the loan may be tax-free
- No monthly mortgage payments
- Not liable for any amount of the mortgage that transcends the value of your home
- Several options for receiving the proceeds of the loan
Disadvantages of Reverse Mortgages
- Potentially high fees
- Balance of the loan increases over time
- Fees may increase over time
There are many factors impacting a reverse mortgage, including the borrower’s age, value of the home, interest rate, and limits set by the Federal Housing Administration’s (FHA).