If you’re retired after many years of hard work, you’re probably looking forward to relaxing, pursuing interests and just generally enjoying life. Unfortunately, your home doesn’t take a rest from needing repairs and upgrades during your retirement years. Most people have a reduced income after retirement, and home improvement costs can seem overwhelming.

A reverse home mortgage offers an opportunity to get cash for home improvement projects without ever having to make loan payments. Read on to learn about reverse mortgages, and whether they are right for you or a family member.

Reverse Equity Mortgage Basics

A reverse mortgage, also known as a reverse equity mortgage, is a home loan taken against your home equity. Payment on the loan is not collected until you die, move or sell the home. This home improvement financing option gives you a source of tax-free income to repair and upgrade your home.

Reverse mortgages are exactly the opposite of traditional mortgages. With a reverse equity mortgage:

• As you collect cash from a reverse mortgage, your debt increases and your home equity decreases.
• As you make payments on a traditional mortgage, your debt decreases and your equity increases.

Getting a Reverse Mortgage

Reverse mortgages are designed for older homeowners. Following are some facts on qualifying for a reverse home mortgage:

• No credit check is necessary.
• No income limits apply.
• The mortgaged home must be your primary residence.
• You must be at least 62 years of age.

If you have unpaid debt on the home, you’ll need to pay it off as soon as you receive your reverse mortgage funds.

Advantages of Reverse Home Mortgages

Reverse mortgages have some distinct advantages over other methods of financing home improvement costs. Some of these benefits are:

• Choice of credit line, lump sum or monthly cash installments
• Easy approval
• Monthly income for as long as you live in your home, even if the loan balance grows higher than the home’s value
• No need to make monthly payments
• No payment due until the homeowner passes on, relocates or the home is sold.

Homeowners can rest assured that neither they nor their heirs will ever have to pay more than the home is worth. This will always be the case, no matter how much is paid to the owner during the loan, or how high interest rates rise.

Disadvantages of Reverse Mortgages

If you decide to take out a reverse mortgage, you should be aware of this program’s disadvantages, including:

• Adjustable rates that can be high
• Falling home equity
• Higher closing costs than other types of loans
• Rising debt.

The cash received from a reverse mortgage can also affect a homeowner’s ability to receive Medicaid or Supplemental Social Security (SSI). Your eligibility for Medicare and Social Security Income, however, will not be affected.