UNDERSTANDING REVERSE MORTGAGE SCHEMES
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WHAT IS A REVERSE MORTGAGE SCHEME?
A reverse mortgage is a loan that allows homeowners over 62 years of age to borrow money against the equity in their homes, without having to make monthly mortgage payments. A reverse mortgage is a loan that allows homeowners over 62 years of age to borrow money against the equity in their homes, without having to make monthly mortgage payments.
HOW DOES A REVERSE MORTGAGE SCHEME WORK?
The lender pays the homeowner in a lump sum, a line of credit, or monthly payments. The loan balance increases over time as interest and fees are added to the loan.
When the homeowner dies or sells the home, the loan must be repaid, usually from the sale proceeds of the home.
TYPES OF REVERSE MORTGAGE SCHEMES
The Home Equity Conversion Mortgage (HECM) is the most popular reverse mortgage program, insured by the Federal Housing Administration (FHA).
The HECM Standard loan allows homeowners to access more equity but requires upfront fees.
ADVANTAGES OF A REVERSE MORTGAGE SCHEME
Provides a steady source of income in retirement without the need to sell the home or move. Allows for flexibility in how the funds are received (lump sum, line of credit, monthly payments). No monthly mortgage payments are required during the loan term.
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