If you’re 62 or older and need some extra money, you might want to consider a reverse mortgage. Also referred to as a home equity conversion mortgage (HECM), you can choose from mortgages that are and aren’t backed by the Federal Housing Administration.
These mortgages allow you to take some equity out of your home, and it doesn’t have to be paid back until you no longer occupy the property. With California property values being as high as they are, it could be an easy to add extra income to your retirement. Before you move forward with a reverse mortgage, it is a good idea to get some information.
Let’s start with the reverse mortgage process.
How a Reverse Mortgage Works
You have a basic idea of how reverse mortgages work. Still, it is a good idea to examine it a little closer so you will know if this is a good option for you and your family.
If you decide to get a reverse mortgage, you will take some of your home’s equity out. You can take it out as a line of credit or cash. You can also take it out as a monthly or lump sum payment. In addition, lenders allow you to take it out in both a credit line and a payment.
When you take out equity with other loans, you have to pay it back immediately, but that is not the case with a reverse mortgage. The lender doesn’t require any payments on the loan until you pass away or move out of the home. You can make payments if you wish, though.
Many people use the money they get from their reverse mortgages to supplement their retirement incomes. In fact, many people who are strapped for cash and have a lot of equity in their homes choose this option.