How Do You Receive Payments From a Reverse Mortgage? by Barry Waxler

If you decide that a reverse mortgage is the right choice for your situation, you may be wondering about a few particulars, like how do you receive payments from a reverse mortgage?

A reverse mortgage works much differently than a traditional, or straight, mortgage. Instead of having to pay off a debt or loan in order to own your home, a reverse mortgage pays you money based on the equity that is in your house. You are not required to pay this reverse mortgage back - the payments become due upon your death or if you leave your home for more than 12 months (considered a permanent move). Money is paid to the mortgage holder - but how do you receive payments from a reverse mortgage?

There are several different ways that the payments from a reverse mortgage can be made to you. The first way is in a lump sum - similar to the way you would receive money if you chose to take out a second mortgage or a home equity line of credit. You will generally get less than the full equity of your home, but getting your money all at once can be a good idea if you need to perform home repairs, or if you want to purchase a large item such as a car or motor home.

You can also choose to get payments monthly, based on your age. These payments will be broken down based on your projected time of need (how long you will need payments for) and will continue until all of the equity in your home is used up. This is a good choice for homeowners that want to have a continuous salary type benefit paid to them. The reverse mortgage monthly payments can be used to augment Social Security payments or other pension plans.

A third answer to how do you receive payments from a reverse mortgage is by getting monthly payments over a specific timespan. You can choose to have the amount of your equity broken into even installments and paid to you over an amount of time you choose - from just a few years to many. This can be helpful if you want to make sure you get all of your home's equity paid to you before your death - and also if you need money over a specific timeframe.

There are a few different options to getting your money from a reverse mortgage, and each option comes with its own pros and cons. Depending on your situation, you will need to decide which option is right for you if you choose to apply for a reverse mortgage.

About the Author
Barry Waxler provides alternatives to a reverse mortgage that help you avoid waisting the equity in your home. Visit him at UFCAmerica.com.