How does a Reverse Mortgage Work?

Often many older people as they age, find that their house is their most valuable asset. Worth a lot of dollars on paper but those dollars are not available to pay the taxes and maintenance or even to pay for other essentials. Many do not want to sell their houses, for whatever reason, at that point in their lives, but could do with some of the money tied up in their house valuation. There are a number of funding options out there and one that may end up being recommended is that of a reverse mortgage. However many people ask how does a reverse mortgage work? And is it for me?

The concept of a reverse mortgage is that unlike a traditional mortgage where you borrow a sum and pay it back including interest over time, with a reverse mortgage there are no regular repayments. Instead an amount is borrowed and interest accumulates and is added to the amount owed. The total amount borrowed is then repaid on your death or when the house is disposed of.

The amount you can make use of as a reverse mortgage will depend on what age you are. Those that are older will be able to borrow a larger percentage of their total house value and the younger you are the smaller that percentage will be.

For the lender the risks are quite low because the amount able to be borrowed will be quite small compared to the overall house value.

It is possible to take the reverse mortgage as a lump sum amount, as an annuity or simply to draw it down as you need it. The options will depend on the contract you sign.

As you retain ownership of the house its equity remains available to your family on your death. And you are still able to see your house value moving with the local property market - it's still yours.

For more information on how does a reverse mortgage work you can find more detail at the web page. The reverse mortgage pros and cons are covered along with many other important reverse mortgage facts.