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Reverse Mortgages: Stay Home, Make MoneyGet today's rates from 4 lenders.
A reverse mortgage is a loan that lets homeowners age 62 and older take money out of their home and never have to move out or worry about paying it back.
Think of a reverse mortgage as the mirror image of a traditional mortgage. When you borrow to buy a house, your monthly payments whittle away at your debt and build up your equity over time.
With a reverse mortgage, you gradually take that equity out and increase your home's debt. The bank doesn't collect the principal and interest until you or your heirs sell.
Although reverse mortgages still represent only a small fraction of home loans, demand for these once obscure financial products has grown exponentially. Last year more than 43,000 homeowners took out a reverse mortgage. In 1990 about 150 did.
Today real-estate-rich retirees are taking out reverse mortgages to pump up their income, fund home improvements or refinance debts. Still, these loans are not without serious drawbacks -- complexity and high costs among them.
How much you can borrow comes down to four factors: the value of your house, where you live, current interest rates and your age. (Younger homeowners qualify for smaller loans because a longer life span means more years for interest to accrue -- and more risk that the bank will lose money.) For an estimate of what size loan you could qualify for, click here.