hr: Money

A reverse mortgage is where you capitalize on the value of your home. It’s like a deferred sale. You approach the bank, or the bank’s salespeople approach you, and if you agree to the terms, they either pay you a lump sum amount that is based on the value of the home, or they agree to pay you a monthly amount, which once more depends on the valuation of your property.

Photo Credit: kevindooley

Usually monthly income is provided until your death, or if you are married, the death of your spouse too, and then the bank takes possession of your home. It’s like taking your home out to pay for the remainder of your years.

In countries like the US, it’s a very popular scheme, and is available to senior citizens above the age of 62. The banks usually give you up to 60% of the value of your home, which can be fairly substantial for the average individual considering that he/she gets to spend the rest of their life in it as well.

It must be noted, that banks often charge costs which can turn out to be rather expensive, amounting to up to 5% or more of your home. The details will depend on the specific scheme that you take out, and different countries have different implementations of the same thing.