Reverse Mortgage Basics

The basic idea behind a reverse mortgage is that you own your home and therefore you have a large amount of equity tied up in it.  On the other hand, as you progress into your senior years and retirement your income will probably not be what it used to be and because of this you will find yourself in a situation where you are asset rich but cash poor.  The reverse or equity release mortgage will allow you to rebalance the situation.  It allows you to sell all or part of your home while continuing to live in that home and getting the cash now as a lump sum or as an ongoing stream of income.

If you’re a senior and you find yourself in this situation then this type of deal may be very attractive to you.  Like almost anything to do with finance it is a double-edged sword and while releasing the money in the short-term can be hugely helpful for your lifestyle it is worth bearing in mind that the property or selling all or part of will appreciate by a far larger degree over the coming years.  Really, the whole trick here is striking a balance.  Rather than selling the entire property it might be better to look at partial equity release where you would sell part of the property and still continue to hold a stake yourself.  This situation would mean that you would have the benefits of the cash released but also that you would not be giving away the full appreciation of the value of the property into the future.

On other pages on this site certain particular aspects of reverse mortgages or equity release mortgages are discussed in more detail but this page is more about giving you a general overview of the type of situation that you may be getting involved in.  If you find yourself in an asset rich but catch poor situation then this may be the ideal type of financial product to rectify that situation but like anything before you get too deeply involved and finish up signing some sort of a deal it’s important also understand the pitfalls as well as the benefits.

We hope you found this basic overview useful and for more details please feel free to visit the other sections on the web site.

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