Surviving on a fixed income is often feared by those getting close to retirement age. With the high cost of living only continuing to rise, and retired people living much longer than ever before, it is no surprise that the mortgage industry has creatively begun to address this issue. The solution is called the reverse mortgage and obtaining such a mortgage can help a retired couple remain in their home without the pressure of high mortgage payments.
In a reverse mortgage, you have choices to make regarding the way you want to borrow the money. The first type of reverse mortgage is to obtain a lump sum. This type of mortgage allows the homeowner to take out a lump sum of cash for a percentage of the value of their home. Realistically speaking, a home 
that is worth $300,000 will net the homeowner about $190,000. Mortgage lenders take into consideration how old the borrowers are, where the home is located and if the home needs any upgrades or significant repairs when calculating a reverse mortgage payout. You can even pay down your credit cards through the loan.
A lump sum payment has the highest interest rate for all types of reverse mortgages and unless you need a large sum of money, this type of mortgage may not meet your needs as other reverse mortgages can.
The second type of reverse mortgage is technically considered a line of credit. If your current mortgage is not completely paid off, you will need to qualify for a cash payment in order to pay off the mortgage. Once your mortgage is taken care of, you can apply for a reverse mortgage in the form of a line of credit.
A third type of reverse mortgage involves receiving monthly payments from a lender, ensuring that you have extra money every month to meet your needs while on a fixed income. A home worth $300,000 will roughly net the homeowner $1200 a month in cash payments. The mortgage lender calculates the payment amount based on where the home is located, what the home is currently worth and how old the borrowers are.
The final type of reverse mortgage is a combination of the three that are currently available. You can opt to get a small cash lump sum to pay off your current mortgage, get small monthly payments and keep a line of credit open that you can access easily.
To obtain a reverse mortgage, you must be at least 62 years old. It does not matter what your current income is, only that you own your home or you are able to qualify for a cash payment to pay off the current mortgage. People that own mobile homes will not be able to obtain a reverse mortgage for that property.
Borrowers that want to obtain a reverse mortgage are required to meet with a financial adviser that has been approved by the Department of Housing and Urban Development. This is to make sure that the borrower understands exactly what they are getting into and what they can expect from a reverse mortgage.
It is important to understand that when you obtain a reverse mortgage, the loan is not paid back until you die, sell the home, or move to a new location. The loan is paid back once your home is sold from the proceeds of the sale. If you have money left over after the loan is paid back, you or your heirs keep the money. If once your house sells, there is not enough money left to pay back the lender, that was the chance the lender took and the loss is theirs. Your estate does not pay off the balance.
A reverse mortgage can help you stay in your home that you have loved for so long and that you are still able to enjoy. There is no reason that just because you are retired you should have to worry about moving because you can no longer meet basic expenses. Enjoy your home and your retirement. A reverse mortgage may be just the answer for you to be able to continue to live your life as you have been accustomed.
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