A reverse mortgage is a loan for those who are 62 years of age and above. These types of loans are easy to qualify for because there is no credit check or employment verification. These types of loans allow the equity built up over time to be turned into cash. The homeowner can spend this money any way they wish whether it is to use as a retirement fund, pay off medical bills, consolidate debt, or make home improvements. The advantage of a reverse mortgage loan is there are no monthly payments made to the lender. The lender providing the reverse mortgage will make disbursements to the homeowner. The loan amount and interest will cause the balance of the loan to increase each month because they are getting cash payments based on the home equity.
With a reverse mortgage, the homeowner borrows money against the home. There is no monthly payments required and the loan is due when the home is sold or when the homeowner passes away or moves out of the home. The balance will continue to increase with a reverse mortgage. In contrast, a traditional loan will need to be paid on a monthly basis.
Reverse mortgages are often compared to HELOC's or second mortgages, however, the difference is that there are no monthly payments for the reverse mortgage. A home equity loan and HELOC can have strict credit and income requirements while a reverse loan has fewer requirements and none in terms of income or credit.
Common reasons for choosing a Reverse Mortgage: