Deriving Income from Your Home Mortgage

Is your home mortgage tying up a large amount of your personal equity? Do you need a new source of income? And are you 62 or older? If you answered yes to all three questions, you should give serious thought to a reverse mortgage. In a reverse mortgage, a lender makes reverse home mortgage payments to you out of the equity you have invested in your house. You may choose to get the value of your property in monthly payments or in a lump sum. You are allowed to remain in your house until you move away, enter a retirement community or nursing home, or pass on.
Will my taking out a reverse mortgage cancel out my current home mortgage?
No, but you are strongly encouraged to pay off the remainder of any existing home mortgages with the proceeds of your reverse mortgage. Depending upon where you live, you might not be allowed to have any other home mortgages than the reverse mortgage on the property, so you may need to pay off your previous mortgages with the proceeds of the reverse mortgage before you can begin to use the income for other purposes.
Can I will my house to my heirs if I take out a reverse mortgage on it?
Yes. Your heirs may redeem the reverse mortgage by repaying the income you received from it. They may also sell the house themselves or let the lender resell the house to cover the cost of the reverse mortgage. Your heirs may need to take out a new home mortgage on the property to cover the cost of the reverse mortgage. However, taking out a reverse mortgage strongly decreases the likelihood that the property will stay in the family. You should consider a reverse mortgage only if you are not interested in having your heirs live in your house after your death.
What happens if the lender finishes making all the loan payments during my lifetime?
If the lender completes the full series of reverse mortgage payments while you are still alive and living in the house (that is, if you receive the full value of the house), you do not need to relinquish your house to the lender and move out. Because a reverse mortgage guarantees you the right of tenancy during your lifetime, you may live in the house as long as you like, without any obligation to return any part of the money to the lender. Staying in the house will not create a debt for you, your heirs, or your estate. In fact, it is not possible for a reverse mortgage to put you into debt. This is one of several points that makes reverse mortgages more attractive than a regular home mortgage.