Do you need some extra cash and have been considering a reverse mortgage? It's important that you know how they work so you can better understand if it is right for you. Here is what you should know about reverse mortgages.

Reverse Mortgages Provide Monthly Payments

What makes a reverse mortgage so unique is that it is not the same as simply mortgaging your home and getting a lump sum of cash. If you have a substantial amount of equity in your home, a reverse mortgage allows you to take some of that money out little by little over time, which is why it is often used in retirement to supplement retirement income. 

As the equity in your home goes down while you get the cash that you need, the amount that you owe in the house continues to rise. The amount of equity in the home doesn't have to go down to zero for it to end, but in general, homeowners end up paying off the reverse mortgage when they eventually go to sell their home. This could be after they pass away and the home is sold, or as they prepare to move into a retirement community or nursing home.

Reverse Mortgages Have Specific Requirements

Be aware that there are certain requirements in your state regarding who can get a reverse mortgage since it is not a mortgage product available to everyone. Each state has its own laws regarding age restrictions, which are typically when you reach the age of retirement in your sixties. You must also use the reverse mortgage for your primary home, and have a lot of equity built up in it. You need to be able to maintain the payments associated with homeownership, such as your home insurance, property taxes, and any homeowner association fees. 

Reverse Mortgages Requires Counseling

The approval process for a reverse mortgage is a bit different from a traditional mortgage. You will have to meet with a HUD counselor during the application process to determine if a reverse mortgage is best for your financial situation. They will help you make a decision about if a reverse mortgage is best for you based on your current financial situation.

These are just a few things you should know about the reverse mortgage process. Reach out to a mortgage lender in your area that offers these types of loans if you want to seek out more information.