Reverse mortgages were designed for more mature borrowers. It provides a way to take advantage of the equity in your home, without having to sell your home. Using your home as collateral, a reverse mortgage works, well, in reverse, in that the homeowner is paid monthly by the lender, rather than having to make a payment to the lender. The borrowed money doesn’t have to be paid back as long as the homeowner retains the home.
When the homeowner dies or moves, the home is sold and after the reverse mortgage is paid, the remaining proceeds are distributed to the estate heirs. Reverse mortgages can be used to supplement retirement income, pay off medical expenses, college loans or even stop a foreclosure and as such, can be a valuable tool in planning retirement.
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