Fund your retirement with a reverse mortgage

If your retirement savings is not keeping up with your lifestyle, consider obtaining a reverse mortgage. This financial product allows you to enjoy the equity you’ve built in your home as a source of income.

A reverse mortgage is a loan secured by your home’s equity. A reverse mortgage works like this: You borrow against the equity you have built up in your home using a mortgage loan. Your mortgage lender either gives you a lump sum of cash or pays you a designated monthly amount for a predetermined number of years or until the house is sold.

When the house is sold, the mortgage lender will be owed the principal and interest due on the house. You or your heirs can choose to sell the house or turn it over to the mortgage lender to come up with the proceeds to pay the mortgage.
Unlike a traditional mortgage, the principal balance of a reverse mortgage gets larger over time, rather than smaller.

Reverse mortgages are designed to help the elderly who own their own homes but need more cash to pay their day-to-day living expenses. The borrower gets to live in their own home until they die and can use the proceeds to pay for their medical care or other needs.

A reverse mortgage may be an option for people nearing retirement who cannot sell their home. If you plan to move again in your lifetime, it may not be a good idea. You’ll have less equity to put toward a new home because you’ll have to pay the entire reverse mortgage note.
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Another consideration is that the reverse mortgage will lower the value of your estate because it reduces equity. If you want to leave your children an inheritance, a reverse mortgage may not be for you.