A reverse mortgage is a type of loan where the homeowner withdraws a portion of their equity but doesn’t have to repay the loan until they leave the house.
With a reverse mortgage, the lender makes payments to the homeowner. The homeowner gets to choose how to receive these payments and only pays interest on the proceeds received. The interest is rolled into the loan balance so the homeowner doesn’t pay anything up front. The homeowner also keeps the title to the home.
Different Types of Reverse Mortgages
Get all the proceeds at once when your loan closes. This is the only option that comes with a fixed interest rate. The other five have adjustable interest rates.
Equal Monthly Payments (annuity)
For as long as at least one borrower lives in the home as a principal residence, the lender will make steady payments to the borrower. This is also known as a tenure plan.
The lender gives the borrower equal monthly payments for a set period of the borrower’s choosing, such as 10 years.
Line of Credit
Money is available for the homeowner to borrow as needed. The homeowner only pays interest on the amounts actually borrowed from the credit line.
Monthly Payments + A Line of Credit
The lender provides steady monthly payments for as long as at least one borrower occupies the home as a principal residence. If the borrower needs more money at any point, they can access the line of credit.
Term Payments + A Line of Credit
The lender gives the borrower equal monthly payments for a set period of the borrower’s choosing, such as 10 years. If the borrower needs more money during or after that term, they can access the line of credit.
How it Works
Advantages of Reverse Loans
The borrower does not need to make monthly payments toward their loan balance
Non-borrowing spouses can stay in the home after the borrower dies
Proceeds can be used for living expenses, debt repayment, healthcare expenses, and more
Funds can help borrowers enjoy their retirement
Borrowers facing foreclosure can use a reverse mortgage to pay off the existing mortgage, potentially stopping the foreclosure
Cameron is a Mortgage Professional who has helped hundreds of homeowners and home buyers find the best possible mortgage products on the market. He has been in the top 1% of mortgage loan officers in the country as well as California for the past two years! In 2019 and again in 2020.
A low stress, efficient, and enjoyable loan process is Cameron’s goal every time.
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