Reverse Mortgages

The reverse mortgage is exactly what it sounds like: a mortgage that works backwards.

A regular mortgage involves a lender collecting payments from a borrower, but with a reverse mortgage the lender pays money to the borrower. Reverse mortgages allow homeowners get cash in return for a mortgage on their house. The house is then used by the bank or financial institution as collateral, as it is with a regular mortgage.

This plan is usually by elderly and retired homeowners who need to supplement their income. The reverse mortgage allows the homeowner to tap into their home's equity without selling or moving out of the house.

Some people will see the reverse mortgage as the perfect loan; you don’t need any income to qualify for one and usually it’s not paid back until you’re dead.

Reverse mortgages can also be attractive because they provide the homeowner with income that is tax-free. The payments are usually made from the lender to borrower either as one big lump sum, or in monthly installments and Uncle Sam takes nothing.

As part of a reverse mortgage a homeowner borrows against their home’s equity until the total principal and interest reach the credit limit of equity, when this happens the lender usually requires the borrower to repay in them in full or they can take the borrower’s house.

Usually no payments are made on a reverse mortgage until the borrower moves out of their house or it is sold to someone else. Reverse mortgage repayment terms are quite reasonable. The lender is typically not paid anymore than the proceeds from the sale of the home.

So when you can’t work anymore, get your house working for you and tap into a reverse mortgage.