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What is a Reverse Mortgage?

By
Mortgage and Lending with Free State Mortgage, LLC

Answer: A reverse mortgage is a loan where the lender pays you instead of you paying the lender. Home equity is tapped to make these payments, which can be lump sum or monthly. Generally, reverse mortgages do not need to be repaid until you sell your home. Reverse mortgages are often used for retirees who have a lot of equity in their house but have a reduced income.

A reverse mortgage can pay a dividend to the homeowner from the equity in the owner's home (annunity payments.) Reverse mortgages are also a plus when a homeowner is faced with the decision to either sell their home to get money to live or live in the home and have money, while the asset is increasing in value. If a homeowner has significant equity in a home, a reverse mortgage might be the answer.

How the loan works: Based on the home's value, the lender makes payments to the borrower as monthly income, a lump sum of cash or a line of credit; borrower retains ownership; no repayment until the homeowner dies or sells the home. Home is then transferred to the beneficiary were it can be refinanced or sol at which time the lender is paid in full.

Qualifications: Homeowners must be at least 62 years old and live in the home or condo as their primary residence. NO credit score requirements.

 

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