A reverse mortgage is a loan against your home equity that requires no repayment for as long as you live in your house.  The loan will be paid off when you cease to live in your home.  There are no monthly payments and you can choose to get the money in one lump sum or in monthly payments.  The money is also tax-free. 

 
A reverse mortgage requires no monthly payments and therefore you do not have to worry about not making payments or losing your home.  You can qualify for a reverse mortgage if you are 62 years of age or older.  The loan amount is determined by how much equity your home has built as well as what the current interest rates are, etc.  Your personal credit has nothing to do with whether or not you will qualify.  If you are still paying on your existing mortgage, the amount that is left will be used to pay off your mortgage. 

 
For example, say if you have you owe $100,000 on your existing mortgage and your house qualifies for $125,000 reverse mortgage and you plan on living in the house for at least another 5 years.  Your current mortgage would be paid off and you would have $25,000 to do whatever you want with.  You could put a down payment on a vacation home, take the vacation of your dreams or give the money to your grandchildren for college.  It is completely up to you what you choose to do with the money.  The loan is repaid when you cease to occupy your home. The amount owed can never be more than the value of your home. If your home is sold for less than the mortgage, the rest of the money goes to your estate.

With the downward turn in the housing market, many homeowners are opting to stay put for a few more years.  This isn’t a bad option, as housing values will continue to rise, providing homeowners with additional equity in their house.

But if we’re all settling in for the long haul, why not help edge our equity along?

We never bothered to put in home improvements until a year before we sold our old house.  It was such a waste to make the house more attractive for another family to own it, without reaping the benefits ourselves.  This time, we’re doing things different.

While the country waits for the next upturn in housing sales, build your equity and make a cozy nest at the same time.  Put some fresh paint on the walls, put down new carpeting, re-finish your hardwood floors.  Major projects build major equity too like bathroom and kitchen remodeling, new windows, new siding, and new roofs.

Don’t think you can swing the finances?  Consider taking out a home equity loan, especially if you’ll be staying a while.  Most are tax-deductible and have lower interest rates than credit cards.

Now sit back and enjoy your “new” old house!