Financing your home is probably one of the least fun aspects of home ownership. Nevertheless, it’s essential. And when it comes to a reverse mortgage, things get a little more interesting. With a reverse mortgage, you can take advantage of the value of your home without selling it. Sounds pretty good, doesn’t it? Before you call your bank, here are all the facts about how reverse mortgages work.
What is a Reverse Mortgage? Reverse mortgages are also referred to as equity release. They allow you to borrow a percentage of the current value of your home. This percentage is based on a number of things including your age, the appraised value of your home, and your lender. Basically, the older you are and the longer you’ve had your home, the more equity you will have in your home. As well, current market trends will also contribute to the amount of money you can access.
How is a Reverse Mortgage Paid Off? One of the things that appeal to homeowners is that payments on reverse mortgages are not required until the loan is due. The loan is usually due at the time of death or when you sell your home. One thing to consider is that the longer you go without payments toward a reverse mortgage, the more interest you will owe. That is very important because this can negatively affect the equity in your home, meaning when you decide to sell, you might not end up with as much profit as you were expecting.