Reverse Mortgage: Info on Reverse Mortgages

Although mortgages are often spoken of with fear and disdain, a reverse mortgage may have the opposite effect on the homeowner. A reverse mortgage is a type of home loan that lets the homeowner convert a certain amount of the equity of his or her home into cash. Equity builds up over years of mortgage payments, a portion of which is eventually paid to the homeowner.

The key difference between a reverse mortgage and a home equity loan or a second mortgage is that you do not have to repay anything until you no longer use the home as your primary residence. In order to be eligible for a reverse mortgage, the homeowner typically must be above 62 years of age and must have a certain amount of equity on the home. There are no other special requirements.

As far as property eligibility is concerned, single-family homes, 2-4 unit properties, manufactured homes, condos, and townhouses are all eligible for a reverse mortgage. Co-op housing is generally ineligible for a reverse mortgage, although some local financial institutions may have developed reverse mortgage programs for cooperative housing in your area.

Proceeds from a reverse mortgage can be used for any expenses. They do not need to be siphoned off into any particular area: the money is yours to spend. You can qualify for a reverse mortgage even if you have an existing mortgage that you have not yet paid off, but you must first clear any debt. The money from the reverse mortgage can actually go toward paying off your first mortgage. This makes the reverse mortgage a great idea for any eligible homeowner.

Reverse Mortgage Home (Image: Flickr)