When you are planning for retirement, you must be apprised of all of your options. There are those who are in need of liquidity late in life, and if you find yourself among them you may want to consider taking out a home equity conversion mortgage.
Home equity conversion mortgages are federally insured reverse mortgages. As the term “reverse mortgage” implies, things work in a reverse manner with these loans. Rather than you paying the lending institution in an effort to build equity in your home, the lender pays you and in essence purchases equity.
The borrower must be at least 62 years of age and have sufficient equity in the home or own the property outright. Because you are not being asked to pay anything out-of-pocket, your income and credit are not big factors like they are when you are applying for a conventional mortgage.
You can receive monthly payments, a line of credit that you can use as you see fit, or a combination of both.
The loan becomes due and payable when you either pass away or choose to move from the property voluntarily. You or your heirs may choose to sell the house to pay the loan and keep the difference, but you are free to pay the loan in some other way if you want to keep the property.
We would like to state that we are not necessarily recommending this course of action. These mortgages do come with considerable costs in the form of interest and fees and this is something to keep firmly in mind.