Reverse Mortgages or (HECMs) are a special home equity loan for homeowners of 62 years of age or older. These loans allow borrowers to borrow against the equity that they have built up over years of paying down the mortgage on their home to supplement their retirement income.
The loan itself will have fees and closing cost involved as there is with any mortgage transaction. Also there is interest added to the loan balance each month, the loan balance grows over time, and funds may be disbursed via a lump sum single disbursement, in monthly payments, or as a line of credit.
Borrowers generally do not have to pay back the loan while themselves or an eligible spouse live in the home; however, borrower must continue to pay taxes, insurance, utilities and to maintain the home in order to continue to occupy the home. "Non-borrowing" spouses may be eligible to continue living in the home after the borrower passes away; however, the non-borrowing spouse will stop receiving the money from the reverse mortgage after the borrower spouse passes away.
The loan becomes due in full at the time the last borrower, co-borrower, or eligible spouse either passes away, sells the home, or moves out. Borrower's estate or heirs may pay off the reverse mortgage through the sale of the home or retain the home via a refinance (neither the borrower nor their heirs will have to pay back more than the home is worth).
Reverse mortgage is not a risk free loan and should be considered carefully.
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