If your elderly parent is on a fixed income and is scraping to get by, he or she could take out a reverse mortgage as a way of obtaining cash to use for living expenses. A reverse mortgage requires owning a house and has other requirements, but it is an ideal solution for seniors who need money. If your parent takes out a reverse mortgage, you might be wondering how you pay it off. If so, here are a few things to know about this.
The basics of how a reverse mortgage works
A reverse mortgage allows seniors to tap into the equity they have in their homes without worrying about repaying the debt. There are several rules that apply to qualify for a reverse mortgage, but if a lender approves the loan, the senior could receive money right away. Seniors utilize these loans when they have no other resources to use for obtaining cash to live on, and the best part is that they do not have to make payments on the money.
When the loan is due
If a person takes a reverse mortgage out on his or her home, the lender will base the amount on the value of the home and the equity it has. The borrower would not have to repay the loan until he or she moves out of the house for 12 months. For example, if the borrower moves in with someone or to a nursing home, the loan would not be due until he or she has been out of the house for an entire year. The only other time the loan would be due is if the person decided to sell the house.
Ways to pay it off
The main way people repay reverse loans is by selling their homes. If you sell the home, the reverse mortgage lender is a lienholder in the deal, so this lender would receive the money first from the proceeds of the sale.
If a child of the homeowner decides to keep the house, he or she would need to get a loan to pay off any liens on the house, including the lien for the reverse mortgage lender. You would not have to repay the loan until one of these events occurs, and this is a huge benefit offered by these types of loans.
Are you interested in learning more about loan options? If so, call a lender who offers reverse mortgage loans.