How does a reverse mortgage work?

How does a reverse mortgage work? - Designed for seniors, a reverse mortgage is a loan that allows the homeowner to convert some of the equity in their home into cash or monthly income, while retaining home ownership. Reverse mortgages work much like traditional mortgages, only in reverse. Rather than making a payment to the lender each month, the lender pays the borrower. All persons on the title must be at least 62 years old and occupy the home as their principal residence. You must own your home "free and clear" or have a very small mortgage balance. Income is not required to qualify. Reverse mortgages do not have to be paid back until the last surviving borrower dies, sells the home, or moves out. The total amount owed at the end of the loan equals all of the cash advances youve received, plus the accrued interest.

Reverse mortgages also work in a purchase transaction. You can purchase a home without making a single monthly mortgage payment. This option allows seniors to move close to family when the need arises. There are various ways seniors can benefit with a reverse mortgage including receiving additional tax-free monthly income or a lump sum payment, canceling a current mortgage payment, funding long term care insurance and in-home care, renovations and repair work to their homes.