Reverse mortgages allow senior homeowners to convert their homes equity into cash. If you are currently a homeowner 62 years of age or older, and do not plan on selling your home within the next four years, a reverse mortgage may be an option that you want to consider.
There are virtually no eligibility requirements and neither your income nor your credit rating are of any consequence. With a reverse mortgage you don’t have to make monthly repayments as the loan doesn’t have to be repaid until you either pass away or sell your home. You can even obtain a reverse mortgage if you still have a balance on your current mortgage loan. Keep in mind, however, you are still responsible to pay the remainder of the balance for your original mortgage that should this happen.
You even have the option in how you want your reverse mortgage funds to be paid out. You can choose to receive your money via lump sum, through regular monthly installments, or sent through an account where you can draw money as needed.
There are also some downsides to reverse mortgages that borrowers should to be cognizant, with the biggest one being substantial upfront costs. Upfront costs typically run between 5-6% of the value of the underlying homes which is one of the reasons why reverse mortgages are so popular with lenders. Reverse mortgages are also subject to finance and interest charges, as well as loan origination fees. This means that the borrower either has to come up with cash to pay for these charges or roll the costs into the mortgage amount.