A reverse mortgage is a type of loan that allows homeowners who are 55 years of age or older to convert a portion of their home equity into cash. Unlike traditional mortgages, with a reverse mortgage, the borrower does not make monthly payments to the lender. Instead, the loan is repaid when the borrower moves out of the home, sells the property, or passes away.
Before getting a reverse mortgage, you must pay off and close any outstanding loans or lines of credit secured by your home. These can include a mortgage and a home equity line of credit (HELOC). You can use the money you get from a reverse mortgage to do this.
One of the benefits of a reverse mortgage is that it can provide additional income for retirees who may have limited sources of cash flow. It can also help seniors pay for unexpected expenses like healthcare costs or home repairs. Additionally, the borrower retains ownership of the home and is responsible for property taxes, insurance, and maintenance.