Can you really tap into the accrued equity in your home during your golden years to help fund your retirement? And can you do this without having to prove your income or rely upon your credit rating? Yes, and yes, explains realtor Marc Sporn. The answer is a reverse mortgage – a special kind of mortgage that you do not pay back until after you die. Here’s how it works.
No Credit Requirements
A reverse mortgage is not based upon your credit rating. Rather, it is based upon your home’s existing equity and your age. These loans also mandate that you are age 62 or older, are able to prove that you have the funds to maintain the home, funds to pay the insurance and funds to pay the property taxes. That’s it.
No Income Requirements
As stated above, there are no income requirements for these loans. Whether you work or not will not matter or be considered when applying for the loans. But you will have to show that you can afford your insurance, property taxes and home upkeep to the lender.
Based On Equity
A reverse mortgage is a unique loan because it’s based upon your home’s equity and not your income or credit. Typically, lenders want to see homes that are mostly paid off. When you take out the loan, the existing remainder of your loan is paid off and this loan replaces it, with a payout going to you in the form of a line of credit, monthly payments or a lump sum payout.
Repay After You Die
Here’s the best news: you don’t repay these loans while you are alive. Rather, the loan is paid off after your death following the sale of your home. Any remaining funds are distributed to your heirs as per your will.