A reverse mortgage is a way older homeowners can cash in the equity in their homes to help finance a vacation, pay off medical bills, or simply help finance their retirement. Thanks to a number of changes in how reverse mortgages are done, this option has become more popular in recent years. Homeowners do not have the option of taking out a reverse mortgage until they are 62, providing those who have left the workforce with an alternative to living off of their Social Security and retirement funds.
Most people do not realize that a reverse mortgage can be arranged in one of two ways. Those considering a reverse mortgage will want to examine each option to ensure they are doing what is best for their financial situation:
- Homeowners can receive a lump sum. This is the more popular option for a few reasons. First, it provides a large sum of money upfront, which can be very helpful in a number of circumstances. Second, it also eliminates any monthly servicing payment the homeowner may have, reducing their overall monthly expenses.
- Homeowners can activate a line of credit. This line of credit allows the homeowners to take funds when they want or need to. For example, those who choose this option may want to invest in the stock market or may need a little extra income every now and then. The amount of credit available may also increase over time, too.
It is also possible to negotiate a combination of a lump sum payment and monthly payments. Chat to your lender about the best option for you.
Let the free MoneyTips Retirement Planner help you calculate when you can retire without jeopardizing your lifestyle.