A reverse mortgage is a special kind of loan that some homeowners can use to turn the value of their homes into cash. Simply put, a reverse mortgage is a type of loan that gives you money every month, all at once, or as a line of credit. Or a mixture of the two
Reverse mortgages were originally made for retirees who wanted to stay in their homes but didn't have enough money to live on. They are usually used to help people with low incomes pay for daily expenses, large medical bills, or the occasional house maintenance and repair costs. If you already have a loan, the reverse mortgage will also pay it off. So you no longer have to pay for your house. The money you get each month from a reverse mortgage is guaranteed, and you'll keep getting it as long as you live in the house.
Many older people are interested in reverse mortgages because the loan advances, which are not taxed, don't usually affect their Social Security or Medicare benefits. You can choose how to get your money out of a reverse mortgage, which is another benefit. You can get a lump sum, a line of credit, or monthly payments, or you can get any combination of these three. So, if you were eligible to borrow $200,000 through a reverse mortgage, you could choose to get $60,000 upfront to cover current expenses and keep the rest as a line of credit that you can use whenever you need it. Because reverse mortgages are flexible, they can give you a lot more financial freedom in retirement.
The cost of a reverse mortgage is one of the things that makes it less appealing. When compared to a regular mortgage, reverse mortgages tend to be very pricey. This is because reverse mortgages tend to lead to more debt over time. The payments on a reverse mortgage can also make it harder to get a pension for seniors or extra money from Social Security. Seniors may not even realize this is a problem until they already have a reverse mortgage. Only then do they find out that it can hurt their finances more than what they were trying to achieve by getting the mortgage in the first place.
With these things in mind, reverse mortgages are a good option to think about if you want to add to your current income. As with any financial decision, you should talk to a trained financial expert to figure out if a reverse mortgage is right for you and your situation. For the math, please go to
