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Posted on: 27 June 2019

Retirement slips up on a surprising number of Americans, leaving them with little or even no savings to fund their post-career lifestyle. For a growing number of Americans, postponing retirement and continuing to work—by staying on at their original job or seeking a different one—has become necessary to ensure sufficient income for their household. 

For those who cannot or do not wish to continue working, finding another way may involve exploring a reverse mortgage. If you are an older homeowner who is wondering if a reverse mortgage could be the financial boost you need for the retirement years, the following information will help you understand how this loan option works and whether it is a good choice for your situation. 

Reverse mortgages explained 

A good way to explain how a reverse mortgage works is to picture a regular mortgage in reverse. Instead of making payments to purchase a property, a reverse mortgage enables the lender to make payments to the homeowner according to a pre-arranged time frame, amount, and payment schedule. 

As money is paid out to the homeowner, their equity in the property decreases while the lender's equity stake increases. While the terms and conditions of reverse mortgages can vary, most allow the homeowner to remain in the home until they die or become too disabled to remain in it. 

Potential positives 

Reverse mortgages can be well-suited for situations in which an older homeowner will need some financial assistance with  home repairs, maintenance, or other expenses without using their pensions or other retirement income or savings. Reverse mortgage payments can be set up in a number of ways, including lump sum payouts, monthly or term payments, or as an accessible line of credit to be used on an as needed basis. 

Potential negatives 

One of the most important negatives found in reverse mortgages is that a reverse mortgage will become due immediately upon the death or disability of the homeowner. Older homeowners who want to bequeath their home to a relative or friend upon their death should know that doing so will require their beneficiary to pay off the reverse mortgage to obtain actual ownership. 

Before considering any reverse mortgage, interested homeowners should always verify that the mortgage lender is a reputable one with verifiable reviews from actual borrowers. To learn more about reverse mortgages and get help in determining whether one would be worthwhile for your situation and future needs, contact a reputable lender who specializes in reverse mortgages in your area.