A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.
Common uses of a Reverse Mortgage
- Payoff existing mortgage and eliminate monthly mortgage payments
- Make home improvements and repairs
- Supplement retirement income and make savings last longer
- Payoff credit cards or other unsecured debts
- Utilize proceeds to manage property taxes and homeowner insurance