Understanding Reverse Mortgages
A reverse mortgage, also known as a Home Equity Conversion Mortgage (HECM), is a type of loan that allows older homeowners (62 or older) to convert part of the equity in their homes into tax-free income. Reverse mortgages are wonderful financial tools for certain individuals; however, it is a very important financial decision. If you are considering a reverse mortgage the first step is to talk with a reverse mortgage counselor.
During your reverse mortgage counseling session, your counselor will work with you to help explain how reverse mortgages work, the financial and tax implications of taking out a reverse mortgage, payment options, and costs associated with a reverse mortgage. Reverse mortgage counselors are not lenders or financial advisors. Their job is to help you understand your financial options so that you can make an informed decision.
If you are interested in a Home Equity Conversion Mortgage (HECM), you can prepare for your appointment by checking to see if you are eligible. To do this, you can use the AARP reverse mortgage calculator.
The AARP also suggests you ask yourself the following questions:
- Do you really need a reverse mortgage?
- Can you afford a reverse mortgage?
- Can you afford to start using up your home equity now?
- Do you have less costly options?
- Do you fully understand how these loans work?