Reverse mortgages may be one of the most powerful financial planning tools available to homeowners over 62 years of age. If you have equity in your home, you may be able to eliminate your mortgage payment while you live in your home – and still retain ownership!
A reverse mortgage is called “reverse” because the loan balance slowly goes up instead of going down. Instead of having home equity that is idle, it is slowly used in place of monthly payments. But what happens if the loan amount gets higher than the value of the home? As long as the borrower is still living in the home, nothing! They get to stay there and simply need to pay their taxes and insurance as normal.
The one caveat is that if a borrower leaves the home permanently, the home must be sold. If there is equity left in the home, it goes to the borrower or the borrower’s estate. If the equity has been used up, then the home goes back to the government and the borrower / estate owes nothing more!
While it is not a product for everyone, it can be life-changing for those who fit the right circumstances. Why live with burden of tight cash-flow when an alternative option is available to you?