Have you been considering a reverse mortgage to borrow money from the equity of your home but you're not sure if it's right for you? It will help to know the following things about reverse mortgages before you move forward.
Reverse Mortgages Allow You To Access Untapped Equity
When you bought your home many years ago, you likely bought it at a price that is much lower than what it is worth. If you wanted to access that equity that has built up in your home due to its higher price, your normal option is to sell your home and buy another one. What do you do if you don't want to move out of your current home though? That's where a reverse mortgage can help you.
A reverse mortgage will have the lender make monthly payments to you rather than you make monthly payments to them. You will borrow money from that equity of what your home is currently worth rather than what you bought it for. When the time comes to repay the loan, you would sell the home and pay off the reverse mortgage with the proceeds from the sale.
Reverse Mortgages Allow You To Have Retirement Income
If you are in a situation where you do not have much saved up in retirement, a reverse mortgage can be a great method to get the money you need right now. Many people use the money from a reverse mortgage to fund their retirement, knowing that after they pass away that their home will need to be sold to pay back the reverse mortgage.
While selling your home would normally give you a large lump sum of money at the time of the sale, a reverse mortgage gives you those regular payments to take the money as you need it. If your home continues to go up in value over the course of the reverse mortgage, the home will be sold at a later date for an even higher price to pay back the entire reverse mortgage and even leave an inheritance to the family.
Reverse Mortgages Let You Walk Away If Necessary
If you do find yourself in a situation where you end up owing more on the home than what it is worth due to depreciation, know that you can always walk away from the home and foreclose on it. The house would then go back to the lender, even if you owe money on it.