Homeowners over 62 may have the opportunity
to convert their home
equity
into income using a
reverse
mortgage.
Reverse mortgages let you borrow against the value of your home, either
by getting a regular monthly check (either for a fixed
term
or for as
long as you live in your home), a line of credit, or some combination.
They’re sometimes referred to as "rising
debt,
falling equity" loans — the
amount you owe grows over the course of the
mortgage
while your equity decreases.
Who qualifies?
These mortgages are geared toward older adults
who need or want additional money in retirement and prefer to
borrow against their equity rather than selling their home or
depending on family members to pay their bills.
The amount you can borrow depends on your
home’s
market value,
your age, and the cost of the reverse
mortgage. Typically, the older you are, the higher the percentage
of your home’s value you can borrow. But some lenders impose
caps
on the amount they will lend.
The price of the privilege
While
interest rates
quoted on reverse mortgages
can be similar to those for regular mortgages, there are additional
fees and charges that can make borrowing this way more expensive
than using other types of loans. Lenders are required by law to
provide a "Total Annual Loan Cost" disclosure form that
estimates the average annual cost as an interest rate,
or percentage
of the loan.
