A reverse mortgage is a type of loan available to homeowners, typically older individuals, that allows them to convert part of the equity in their home into cash. Unlike a traditional mortgage where the borrower makes monthly payments to the lender, in a reverse mortgage, the lender makes payments to the homeowner.
The homeowner can choose to receive the money from the reverse mortgage in various ways, such as a lump sum, fixed monthly payments, or a line of credit. The loan is repaid when the homeowner moves out of the home, sells the home, or passes away. At that point, the loan balance, along with any accrued interest and fees, must be repaid, usually through the sale of the home.
Reverse mortgages are typically used by retirees to supplement their retirement income, cover medical expenses, or make home improvements. However, it’s essential to carefully consider the terms and implications of a reverse mortgage, as they can impact the homeowner’s ability to leave the home to heirs and may have fees and interest that accumulate over time.
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