A reverse mortgage converts equity in your home into cash.
- You can receive a large sum all at once
- You can establish a line of credit to draw on as you please
- You can get paid in monthly installments
If you wish you can pay it back the same as you would any loan. And if you have chosen monthly disbursements, you could continue to collect those for the rest of your life (as long as you're in your home).
If you have an
outstanding mortgage on the house, it should be a smaller amount relative to the home's value (less than 50%). You will still be required to pay property tax & insurance.
You also need to know that the
loan balance increases over time as interest on the loan and fees accumulate (because you don’t need to make loan payments). As home equity is used, fewer assets are available to leave to your heirs. You can still leave the home to your heirs, but they will have to repay the loan balance. HECM reverse mortgages are non-recourse loans. If you walk away from a reverse mortgage, the only recourse is the lender has to sell the property and will keep the proceeds. No matter how large the deficiency balance, it is the lender that is on the hook for any drop in the property's value, if the borrower walks away from the reverse mortgage.
If you need a better plan or option as a retirement solution ……
I have found that Lynn Connors from Common Fund Mortgage is a great resource to learn more about your options and how exactly this program could work for your overall retirement solution.