Why Consider a Reverse Mortgage?
Are you finding yourself house-rich and cash poor as you step into retirement? Has your property double or tripled in value and yet, financial independence seems unachievable?
A Reverse Mortgage draws down on your home equity and becomes an additional source of cash – tax and payment free. Like a traditional mortgage, you borrow against your home. However, unlike a traditional mortgage no interest or principal payments are required until the mortgage becomes due. This means you borrow against your home equity without the stress of any payments, all while retaining ownership of your home and enjoying retirement.
How Does It Work?
The basic idea of a reverse mortgage is simple.
- The bank will lend you a portion of the equity you have built in your home – typically up to 40-55% of the value of your home.
- The maximum loan amount will depend on your age, your equity stake (co-owners), the appraised value of your home, where you live and current interest rates, among other factors.
- You can opt for a lump-sum loan or a set amount of cash at regular intervals.
- Interest accrues until the mortgage is repaid.
- However, no interest or principal payments are required until the mortgage becomes due.
- The mortgage is due when the property is sold or transferred, or when the borrower passes away, moves, or defaults.