You’ve paid off your mortgage. You’re nearing retirement. Do you wish there was some way to take advantage your home’s equity without having to make monthly loan payments?

There is. It’s called a reverse mortgage. With a reverse mortgage you can get cash up front, and you won’t have to make any payments until you leave the home.

How Does A Reverse Mortgage Work?

In a typical mortgage you incur debt up front, and slowly reduce the debt with monthly payments. As you reduce your debt, your home’s equity grows.

Reverse mortgages work the opposite way. Over the course of the mortgage, your debt increases and your equity is reduced. Instead of making payments to a lender, the lender makes payments to you. The debt you incur is not paid off until the end of the mortgage.

When you take out a reverse mortgage, you generally have three options for cashing out your equity:

• In one lump sum
• As regular monthly cash payments
• As a line of credit that you can tap into as you need it

You can also cash out your equity in a combination of these options. The best way to cash out your equity depends on your situation. It’s common to get a large sum up front and pay for home improvements – which may actually increase your home’s equity.

The most popular way to use a reverse mortgage is as line of credit. Over 60% of reverse mortgages cash out equity as lines of credit. This allows you to draw off your home’s equity as you need it. You can protect your retirement savings, and not create too much debt against the value of your home.

The mortgage is due when you move out of your home, or when it passes to your estate. This is an important aspect of the reverse mortgage: because the loan doesn’t come due until the home changes hands, you always have the option of staying in the home.

Who Can Get A Reverse Mortgage?

To get a reverse mortgage, there are three requirements:

• You must own your home
• The home you want to mortgage has to be your primary residence
• You must be at least 62 years old

Unlike most mortgages, you don’t need a regular income to qualify for a reverse mortgage.

You can’t qualify for a reverse mortgage until any current debt on your home is paid off. But you may have enough equity in the home to cover the remaining debt. If so, many reverse mortgage lenders will advance you the amount you need to pay off your original mortgage.

Where Can I Find A Reverse Mortgage?

Reverse mortgages are mainly offered by private lenders. To find a credible reverse mortgage lender, contact the National Reverse Mortgage Lenders Association.

It’s also helpful to use an online quote service. These services can match you with financial professionals in your area, letting you compare quotes.

A reverse mortgage can help you cover the expenses of retirement and protect your savings. If you use your home’s equity wisely, you can make sure you have enough income to enjoy your retirement years.