What is a reverse mortgage and how does it work?
Reverse mortgages allow older people to immediately access the home equity they have built up in their homes, and defer payment of the loan until they die, sell, or move out of the home. Because there are no required mortgage payments on a reverse mortgage, the interest is added to the loan balance each month.
Are reverse mortgages a good option for retirees?
As a result, an increasing number of homeowners are using reverse mortgages as part of a comprehensive retirement plan to enhance their financial security. The loan is called a reverse mortgage because instead of making monthly payments to a lender, as with a traditional mortgage, the lender makes payments to the borrower.
Is a reverse mortgage a recourse or non-recourse loan?
In the United States, the FHA-insured HECM (home equity conversion mortgage) aka reverse mortgage, is a non-recourse loan. In simple terms, the borrowers are not responsible to repay any loan balance that exceeds the net-sales proceeds of their home.