How Does A Reverse Mortgage Work

How Does a Reverse Mortgage Work: A Guide from Citizens Lending Group

“How does a reverse mortgage work?” is one of the first questions we seek to answer when working with seniors in California. Long term financial decisions require very careful consideration and calculation. You need to know what you are signing up for and what the costs and benefits are throughout the entire life of the financial investment you are making. A reverse mortgage is no exception.

If you have been thinking about cashing in on the equity you have built up in your home and wondering to yourself, “how does a reverse mortgage work?” Look no further, your answers are here! In California, contact us today to learn more about reverse mortgage requirements and other important facets of reverse mortgages.

How Does a Reverse Mortgage Work Different from a Regular Mortgage

If you bought your home with a loan from the bank, you have been paying a regular or “forward” mortgage for years. You borrowed money from a bank years ago, and have slowly been paying it back as well as other necessary costs like taxes and insurance. Over time, your debt decreases and the amount of equity (the percentage of the value of your home not held by the bank) increases. Eventually, you own the home outright, and you have 100% equity.

When it comes to answering “how does a reverse mortgage work?”, many of the same factors apply. For example, you still have to pay property taxes, insurance, and home maintenance with a reverse mortgage. A reverse mortgage also has an interest rate just like a regular mortgage. The biggest difference in how a reverse mortgage works is that the bank pays you over the course of the loan instead of you paying them.


How Does a Reverse Mortgage Work: Where Does the Money Go?

Considering the bank gives you money, you might be surprised to learn that you do not have to make monthly payments on a reverse mortgage. The only payment you make comes when you move out of your home permanently, sell your home, or pass away. At that time, the bank will require you to pay the full amount that you have borrowed plus interest and fees that have accrued over time.

The best part of how a reverse mortgage works is that you are typically insured from paying the bank more than your house sells for. Essentially, you get to take all the equity you have built up in your house over the years, spend it, and when you no longer need the house you live in, you return the equity to the bank. Therefore, it is almost like a loan from yourself, but backed by the bank.


How Does a Reverse Mortgage Work? Ask Us!

If you want to learn more about how a reverse mortgage works, the best thing you can do is talk to a company that has experience helping borrowers in California use the equity in their homes. Contact Citizens Lending Group today to find out about reverse mortgage requirements and other facets of how reverse mortgages work.

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Loans made or arranged pursuant to Real Estate Corporation License Endorsement #01814249, California Bureau of Real Estate. NMLS #1109984
These materials are not from HUD or FHA and were not approved by HUD or a government agency.