A reverse mortgage can make sense for some people, but for others it is not the right plan. That's why it's so important for each individual to understand both the positives and negatives of taking out a reverse mortgage. We're here to answer your questions and give you the information needed to make an informed decision.

Qualifying for a Reverse Mortgage
Essentially, a reverse mortgage is a loan a person takes out against the equity in their property. However, it is different than a typical line of credit or traditional mortgage in one major way: the loan does not need to be paid back until such a time that the borrower is no longer living in the home.

When the home is sold or handed down in an estate, then the amount borrowed via the reverse mortgage is paid back.

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Not everyone can qualify for a reverse mortgage. At a minimum, the following criteria must be met:
 

• The homeowner must be 62 years old or older.
• The home must be owned outright or have a low mortgage balance.
• The person borrowing must live in the home.
• The person borrowing is required to review certain consumer information and/or speak with a counselor before receiving the loan.
 

Determining if a Reverse Mortgage is Right for You
For the most part, a reverse mortgage makes the most sense for people who plan to be in their homes for many years to come. The cost of taking out a reverse mortgage includes somewhat substantial fees as well as monthly compounded interest. The interest will continue as long as the loan is out, but the fees are one-time fees. As a result, the longer you have the loan, the less of an impact those fees have on the bottom line.

 

There is a tool that can help you determine if a reverse mortgage works for you. It's called TALC, which stands for Total Annual Loan Costs. By plugging in some basic information, you'll be able to easily determine what the actual cost is and will be able to make an informed decision.

Receiving Payments From a Reverse Mortgage
Of course one question many people have is: How much money can I get in a reverse mortgage? It actually depends on a number of factors:

• The age of the youngest borrower.
• Current interest rates.
• The appraised value of the home.

Once you know how much you'll be able to get, you must then decide how you'll receive the money. There are numerous options, including:
 

• Tenure – Monthly payments that will stay the same and will continue as long as at least one of the people who borrowed money continues to live in the home.
• Term – Monthly payments that will stay the same but will continue for a predetermined amount of time.
• Line of Credit – Payments one at a time, as needed and as requested, until the maximum loan amount is reached.
• Modified Tenure – A combination that includes both scheduled monthly payments as long as one borrower occupies the home, and a line of credit that can be drawn on as needed.
• Modified Term – A combination that includes both monthly payments for a specific amount of time and a line of credit that can be drawn on as needed.

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There's a lot to think about as you consider a reverse mortgage but if you use the TALC, look at all your options, and carefully assess your needs, then you can make an informed decision that's best for your specific needs.