Finance Quick Answers
What is a reverse mortgage?
A reverse mortgage is a complex home loan for senior homeowners who have substantial equity (share of ownership) in their property. In a reverse mortgage, you borrow money based on the value of your home, the amount of equity you have in the home, and your age at the time you apply.
The lender pays you the money as a lump sum, in
monthly installments, or as a line of credit. You do not
have to make payments until you sell your home, move out
permanently, or die. The amount of money you owe
increases over time. You can keep any proceeds from the
sale of your home in excess of what you owe if you sell
it before you die.
To qualify for a reverse mortgage, you must be at
least 62 years old and the current mortgage on your home
must be completely or nearly paid off. You can get a
reverse mortgage regardless of your current income.
According to the National Consumer Law Center, consumers should consider several things before making a decision to apply for a reverse mortgage. See the National Consumer Law Center website for additional information.
You can also refer to the article "Reverse mortgages": http://missourifamilies.org/features/agingarticles/agingfeature14.htm
National Consumer Law Center Website, Consumer Facts for Older Americans: Tips for Consumers on Reverse Mortgages
Brenda Procter, M.S., Consumer and Family Economics, College of Human Environmental Sciences, University of Missouri-Columbia
If you'd like to learn more about this and other personal finance topics, the University of Missouri offers 'Personal & Family Finance,' a correspondence course, through the Center for Distance and Independent Study (800-609-3727). Information about this course is available at http://cdis.missouri.edu/CourseInfo/DetailCourseInfo.asp?1985.
Last update: Monday, February 23, 2009