A reverse mortgage is specific type of home loan that allows you to trade equity in your home for cash now as a long term alternative to a home equity loan. The money is generally paid to you as a lump sum, as scheduled monthly payments, or through a line of credit.
A reverse mortgage will allow you to use the equity you have worked for in your home. You can use the proceeds of the reverse mortgage for anything you choose, including paying off debts or unexpected life expenses.
- At the conclusion of a reverse mortgage, you must repay the loan and may have to sell the home or repay the loan from other proceeds. Charges will be assessed with the loan, including an origination fee, closing costs, mortgage insurance premiums and servicing fees.
- The loan balance grows over time and interest is charged on the outstanding balance. You will be responsible for property taxes, hazard insurance and home maintenance. Failure to pay these amounts may result in the loss of the home.
- Interest on a reverse mortgage is not tax-deductible until the borrower makes partial or full re-payment.