How Does a Reverse Mortgage Work?
With a regular mortgage, you pay a lender every month to purchase your home over time. In a reverse mortgage, you obtain a loan in which the lender pays you. The homes equity is being used to provide payments that are tax free. As long as you live in your home these payments do not need to be paid back. But if you die or sell your home, the loan would need to be repaid. There are three types of reverse mortgages and they all entail borrowing against the equity in your home.
It is very important to understand that reverse mortgages are typically more expensive than traditional home loans, especially if you plan to stay in your home for a short time or borrow a small amount. A revers mortgage will use up equity in your home, leaving fewer assets for your heirs. Be sure to review the different types of reverse mortgages and shop out different lenders. For further guidance please do not hesitate to contact us.