Squeeze can help determine if a reverse mortgage is right for you.
How does a reverse mortgage work?
When you get a mortgage, you pay your lender each month until you own the home. With a reverse mortgage, you get a loan and the lender pays you each month. You may also have the option to take the loan as a lump-sum. How does this work?
If you have equity built up in your home, the lender takes that and converts it into cash that you receive in regular payments. A reverse mortgage is only available to homeowners who are 62 years or older.
How much money can I borrow?
The amount of money you can borrow with a reverse mortgage loan depends on a few factors. The main ones being age, interest rate, your home’s value and the amount of equity you have.
Typically, older borrowers with more equity in their home and low interest rate eligibility will be able to borrow higher amounts of cash.
In addition, how you choose to receive your loan money (lump sum, line of credit, monthly payments) can factor in how much you receive.
What are the borrower requirements?
- Be 62 years of age or older
- Own the home outright or have a low mortgage balance
- Use the home as your primary residence
- Must not be delinquent on any federal debts such as federal income taxes or a federal student loan
- Have financial resources to make timely payments of household-related expenses such as property taxes, HOA fees and insurance.
What can I use a reverse mortgage for?
- Consolidate debt
- Home improvement projects
- Major home repairs
- Establish or grow an emergency fund
- Pay for in-home or long-term care
- Purchase a car or second home
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Pros and cons of a reverse mortgage
A reverse mortgage is not for everyone, and there are pros and cons to think about with this mortgage product.
The additional cash you receive from a reverse mortgage can help supplement your existing retirement income. You can use the money to reach financial goals such as paying off credit card debt or purchasing a second home. The money can also be used to satisfy home needs such as renovating your home to improve accessibility as you get older.
Another benefit of a reverse mortgage is that the loan balance doesn’t come due until the borrower moves out of the home, passes away, fails to pay taxes or insurance, or neglects to maintain the home.