As a result, more seniors are considering reverse mortgages as a way to tap into their home equity and generate extra cash.
Calamia explained that reverse mortgages allow homeowners to access a portion of their home’s value without having to make monthly payments, as long as they continue living in the home and covering insurance and taxes.
“In a nutshell, it is a mortgage against the home that allows for a percentage of the property value to be used as a stream of monthly income, a line of credit, or a lump sum to pay existing mortgages, but it does not come with a monthly payback as long as the borrower lives in the home,” she said. “They do have to pay taxes and insurance, but there’s not that principal and interest part of it.
“In essence, the house is going to pay for the principal that they would receive and the interest on it over time instead of physically making a traditional mortgage payment, the house is paying for it.”
The cash or credit line from a reverse mortgage can be used for various expenses, including skyrocketing insurance premiums. However, Calamia acknowledged that many homeowners are hesitant because of misconceptions surrounding reverse mortgages.
Source: mpamag.com