Reverse Mortgage Loan Blog

For millions of Americans, paying off your home mortgage is a monthly routine. But what if instead of giving the bank money every month, they’re the ones giving you cash.

It’s called a reverse mortgage and experts believe with an aging baby boomer population it will become more popular.

Mortgage Broker Christi Pentecost says it’s the reverse of a traditional mortgage. In a traditional mortgage on a home, you pay off your loan over time, reducing your debt and increasing your home equity.

“A reverse mortgage is just the opposite,” said Pentecost. “You’re actually utilizing the equity that you have on your home to receive either monthly payments back, you can receive a lump sum, you can also have it as a line of credit that you can draw on.”

Only when you sell your house, or you die, does the mortgage then have to be paid.

For example, a homeowner who takes out a reverse mortgage on his home might get a single lump sum of $78,800. If he sold his home in ten years, he’d have to pay back $119,000, which would include interest payments.

“On a traditional mortgage you are paying down that mortgage with your monthly payments,” Pentecost said. “On a reverse mortgage you’re actually increasing the balance of the debt because you’re not making monthly payments, it’s just being added to the balance.”

Not only do you accumulate debt, but the equity on your home decreases as well.

A reverse mortgage is ideal for those that are hitting retirement age and looking to receive additional income from the equity in their home. In fact, to get a reverse mortgage, you need to be 62 years or older, own your home, and have little or no debt on your home.

For more information, Pentecost says to consult your financial advisor, or go to the AARP website.

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