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TERMINOLOGY
Many homeowners find themselves asking the question, "What is a reverse mortgage?" Learning about the reverse mortgage can help you identify a way to create a steady income for yourself once you reach retirement age. Here are the basics of the reverse mortgage and how it works.
Reverse Mortgage
This type of loan is referred to as a reverse mortgage because you will be receiving monthly payments from the lender instead of making payments to them. The lender is paying you a certain amount of money every month to purchase part of the equity in your home.
Qualifications
In order to qualify for a reverse mortgage, you will have to be at least 62 years old and have a house that is paid off or has a minimal loan balance against it. The house also has to be your primary residence.
Repayment
Once the lender is paid off the equity in your home, you are free to continue living in the house for as long as you want. You will not have to make any loan payments during this time period. The lender is not going to be repaid until you sell the house or until you pass away. They will be paid with the proceeds from the sale of the house or from a life insurance payout.
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