Reverse mortgages (also referred to as "home equity conversion loans") give older homeowners the ability to benefit from their built-up home equity without having to sell their home. The lender pays out money based on your home equity amount; you receive a one-time amount, a payment each month and/or a line of credit. Repayment is not necessary until the borrower sells the property, moves (such as to a retirement community) or passes away. After your home sells or you no longer use it as your primary residence, you (or your estate) have to repay the lending institution for the funds you got from your reverse mortgage as well as interest and other finance charges.
The requirements of a reverse mortgage often include being sixty-two or older, using the home as your main residence, and having a low balance on your mortgage or even owning your home outright.
Homeowners who are on a limited income and find themselves needing additional funds find reverse mortgages helpful for their situation. Interest rates may be fixed or adjustable and the funds are nontaxable and do not adversely affect Social Security or Medicare benefits. The house can never be in danger of being taken away from you by the lender unless you fail to abide by the loan terms and/or requirements. It cannot be put up for sale without your consent if you live past your loan term - even if the current property value dips below the balance of the loan.
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