Secrets for paying off an existing mortgage or other outstanding debt with the equity of your home by utilizing a reverse mortgage.
Reverse mortgages are a type of loan that pay a senior home owner a certain amount based on the equity of their home. Unlike a traditional mortgage, in which the homeowner makes payments to the loan holder until the mortgage is paid off, the loan holder pays the home owner. The money that is paid to the homeowner accrues as debt, but does not need to be paid off until their death or until they enter a hospice or living facility. In the United States a person seeking a reverse mortgage must be at least 62, and must take reverse mortgage counseling in order to be sure they fully understand the process.
Benefits of a Reverse Mortgage
Reverse mortgages are primarily designed for seniors who already own their home outright, and who are looking for money to leave to their heirs or to finance health care or a move to an assisted living facility. Reverse mortgage is a good option for many of these people, as they cannot lose the property, and the property can be passed down to children or grandchildren.
Paying Off an Existing Mortgage
Some people who are interested in a reverse mortgage still have an amount owed on a traditional mortgage. Anyone who does take out a reverse mortgage on a home must use the money, as well as personal funds if the payment is not sufficient alone, to pay off any outstanding debt on a traditional mortgage. If this is not possible, the reverse mortgage will not be approved.
Using Reverse Mortgage Payments to Buy a Second Home
As long as the first mortgage has been satisfied, the remaining money can be used for any purpose. It can be put towards health care and living arrangements, used to pay off other debt, or even to buy a second home for the senior themselves or for a family member. There are no limitations or requirements on spending the payments.
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