However, some reverse mortgages are structured to come due on a certain date. Save 10% Today How does a reverse mortgage work? If you can’t afford to pay off the loan when it comes due, you may be forced to either sell your home or take out a traditional mortgage to pay it off. You can apply for a reverse mortgage based on your home equity if you are at least 62 years old. If you receive the loan, the financial institution will provide funds in exchange for your agreement to pay back any money you borrow in a lump sum. Most reverse mortgages are known as Home Equity Conversion Mortgages (HECM) and can pay out funds in any one of the following ways: a lump sum, giving you all the cash at once.a line of credit you can borrow from, up to a certain limit.term payments, giving you regular payments for a limited time.an ongoing annuity, giving you monthly payments. You can keep living in your home, and you can use the cash however you like. Many retirees use a reverse mortgage to supplement their retirement income, for example, or to help pay for unexpected medical expenses. Plus, because it’s a loan, the cash is not considered income by the Internal Revenue Service, so you won’t have to pay taxes on the funds you receive.Īlthough you don’t have to make payments, interest will still accrue over the life of the loan, meaning that you will owe more on the loan over time. In other words, you’ll eventually have to pay back more cash than you received. There are federal regulations in place to make sure that your estate won’t end up owing more money than the value of the home, protecting your heirs in case the housing market drops, but beware of reverse mortgage scams that are not insured by the Federal Housing Authority.

Like any other home loan, a reverse mortgage will require you to keep paying your property taxes, maintain a home insurance policy, and keep up with maintenance on your home to protect its value. What's the downside of a reverse mortgage?Ī reverse mortgage is a good financial choice for some homeowners, but it’s not right for everyone. And the right loan might depend on how it’s structured. There are other costs involved, such as a mortgage insurance premium (both upfront and annually), the lender origination fee, and potential third-party fees. The interest rate could also be fixed or variable, depending on the loan’s structure, and there might or might not be a loan termination date.

Quicken for mac 2015 download