How Does a Reverse Mortgage Work?
Once the homeowner secures the reverse mortgage, they will have a specific amount of time to repay the loan. In the event of the borrower’s death, the amount can be paid back with proceeds from the sale of the home or satisfied in payment from family members.
There are several options for receiving payment from the mortgage, which the homeowner will receive when the reverse mortgage is secured:
- Tenure—Equal Monthly Payments—The money can be paid out in monthly installments, if the borrower lives in the house and continues to live there throughout the duration of the payments.
- Term—Equal Monthly Payments—In this option, the borrower will receive monthly payments for a fixed amount of time, as stipulated in the agreement.
- Line of Credit—The borrower can receive payments as needed until the money is exhausted. The payments are not fixed and the money will be distributed as needed by the borrower.
- Modified Tenure—A combination of equal monthly payments and a line of credit, to be used as long as the borrower occupies the home.
- Modified Term—A combination of equal monthly payments for a fixed amount of time and a line of credit, to be used for a fixed amount of time.
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