When you bought your home, the bank loaned you the money to buy it and you paid them back with monthly mortgage payments.
A reverse mortgage is the opposite. With a reverse mortgage, the bank pays you a monthly payment from the equity in your home.
You repay the money when you sell your home, refinance, permanently move out, or pass away. At that time, you or your heirs must repay the loan plus interest in one payment.
Reverse mortgages are available through most major banks and lenders
Here’s what happens when you contact the lender:
* An appraiser will determine the value of your home.
* The lender will tell you how much you qualify for based on your age, the equity in your home, and the cost of the loan.
* You decide how you want to receive the money. You can receive the money:
o As a lump sum
o In monthly payments
o As a credit line that lets you decide how much of the loan to use, and when to use it
* You sign a contract. The contract will outline the payments you will receive and the amount you have to repay including interest.
Maintaining your Reverse Mortgage
To keep your reverse mortagage in good standing you must:
* Pay your property taxes on time
* Maintain and repair your home
* Have homeowner’s insurance
Your lender can end the reverse mortgage and require immediate repayment if you:
* File for bankruptcy
* Rent out part of your home
* Add a new owner to title
* Take a new loan against your property