A reverse mortgage is where the borrower doesn’t make monthly payments to the lender. Instead, the lender makes payments to the borrower, and the loan balance increases over time. The borrower is not required to repay the loan until the home is sold or the borrower dies. At that time, the lender is repaid from the proceeds of the sale or from the borrower’s estate.
Reverse mortgages can be helpful for seniors ages 62 and up who wish to stay in their homes but do not have the income to make monthly mortgage payments.
Pros
- You don't have to make monthly payments while you reside in the home.
- You don't need to have good credit or an income to qualify for the loan and make monthly mortgage payments
- The money you get from selling your house can be used for living and healthcare expenses, debt repayment, and other bills.
Cons
- There are age, equity, and fee requirements to qualify for the loan.
- The borrower must maintain the home, pay for homeowner insurance, taxes, and more. If not, the borrower risks violating the terms of the agreement and could lose their home.
- If the value of the home decreases, the borrower may end up owing more money than their home is worth.
Who is this ideal for? Reverse mortgages can be helpful for seniors who wish to stay in their homes but do not have the income to make monthly mortgage payments.
A reverse mortgage may be a good option for some seniors, but it is important to understand all the pros and cons before making a decision. Anyone considering a reverse mortgage should speak with their lender to see if it is right for them.
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