How Does A Reverse Mortgage Work?

Reverse mortgages work by permitting a borrower to take out money with no immediate requirement for repayment (the house is offered as security for the reverse mortgage lender’s loan).

There is nothing particularly unique about a reverse mortgage that separates it from other real estate transactions except for the fact that the date upon which the bank collects repayment is less definite than traditional loans that involve real estate.

Typically, these types of mortgages come with three variations. Some lenders provide borrowers with an immediate lump sum payment, others provide smaller lump-sum payments in a manner that mimic a home equity line of credit, and the third option—which is most recently discussed, involves a lender paying the borrower a fixed monthly income.

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