A reverse mortgage is a type of home loan that lets you convert a portion of the equity in your home into cash.
Age: You must be 62 or older.
Living status: The home has to be your primary residence.
Equity: You’ll need about 40% equity in your home.
Additional costs: No mortgage, but you’ll have to pay the cost of property maintenance, taxes and insurance.
Legacy: Leaving the home to an heir is a less likely option than with a regular mortgage because it can use up the equity in your home. Often, you or your heirs give up the home when the loan comes due (soon after you move out or die).
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You’re a candidate for a reverse mortgage if:
- You want to live in your home until you die.
- You can afford to maintain the home.
- You want a line of credit or an increase in monthly cash flow.
Choices of accessing your equity:
- A lump sum of cash at closing.
- Equal monthly payments for as long as you live in the home.
- Equal monthly payments for a fixed amount of years.
- A line of credit you can tap when you need it.