Some changes in the reverse mortgage market may make it easier for seniors to access their home equity, but they also protect lenders from declining values in the real estate market.
A reverse mortgage allows people age 62 or older to convert equity in their home to cash, in the form of a lump sum, a line of credit or monthly distributions. Borrowers using a reverse mortgage do not have to make monthly repayments. The loan is due, with interest, when the borrower dies, moves, sells the house or fails to pay property taxes or homeowner’s insurance. To qualify for a reverse mortgage, the property must be the borrower’s primary residence, and must either be held free and clear or be paid off with a portion of the proceeds from the reverse mortgage. The amount received depends on the property’s value and the age of the recipient.
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