For most of us, the largest investment we’ll ever make is in a home. Once we’ve made that leap, mortgage becomes a cross to bear – or, in some cases, a leveraging tool.
If you’re over 62 years old and qualify in various ways (see the list below), what’s known as a reverse mortgage may allow you to withdraw some of the equity of your home as cash. In a sense, you’re temporarily liquidating a piece of your home.
What makes a reverse mortgage different from a simple second mortgage is that you don’t have to pay back a dime until your living situation changes (for instance, if you stop using the house as your main residence, or decide to sell it).
The general rules are:
- You must be over 62 years old.
- You must own your home outright or have a very low mortgage balance (the exact details of which are, of course, subjective).
- You must live in the home at least most of the time.
- Your home must be a single family home, a 1-4 unit home (and you live in one unit), a HUD-approved condo, or a HUD-approved manufactured home.
You’re also required to receive counseling from what’s called an HECM Counselor before you can qualify for a reverse mortgage.
Call the Housing Counseling Clearinghouse at 800.569.4287 to set up an appointment for counseling.
However, reverse mortgages can be a great deal for strapped-for-cash seniors because the loan is not required to be repaid at all until the homeowner permanently stops living at this property. Following this date, the homeowner (or his estate) has a year to repay the balance of the reverse mortgage or sell the house to pay it off.
And—better yet—if the home does not sell for as much as the balance of the reverse mortgage, the homeowner’s estate is not liable to repay it.
For general information about reverse mortgages call AARP toll free at (800) 209-8085.