For many people, a reverse mortgage is an ideal way to provide steady income throughout retirement. To qualify for a reverse mortgage, you typically need to be 62 or older and have your home full paid off (in some cases you can qualify if you have a very low remaining mortgage balance).
If you meet those qualifications, you should be able to get a reverse mortgage that makes regular monthly payments to you (the amount of these payments is based on your age and the value of your home). You can use those payments any way you want – it’s entirely your money with no strings attached. There are other arrangements available where you can get a lump sum or line of credit – but regular monthly payments are most common.
Once the homeowner passes or sells the home, the mortgage balance is paid off using the proceeds from the value of the home.
A few things to keep in mind when considering a reverse mortgage:
- The homeowner must continue to pay for home maintenance and property taxes
- There are often considerable fees and closing costs (similar to a home purchase or refinance)
- Reverse mortgages can complicate estate planning because there’s a loan to be paid off which often requires sale of the home
Make sure you find a reputable bank or lender if you’re considering a reverse mortgage. They’re a great option for many retirees as long as you avoid potential pitfalls.