If you are looking for a way to make your home's equity work for you, a reverse mortgage may be the right option. When you take out a reverse mortgage, payments are made to you instead of you making payments to your lender. You are borrowing from your home's equity, usually in the form of monthly payments or a lump sum. Reverse mortgages are an excellent way to pay for medical costs or supplement your income during retirement. But is a reverse mortgage the right loan for your needs? Here are three things to know.

There Are Different Kinds Of Reverse Mortgages

You have the choice between three types of reverse mortgages, including single-purpose, home equity conversion mortgages (HECMs), and proprietary reverse mortgages. Before you make a decision, weigh the pros and cons and each kind of reverse mortgage. One type of reverse mortgage may work better for your needs than another. For example, those who have valuable homes often seek out proprietary reverse mortgages. 

There Are Different Ways To Receive Payments

Another thing to consider is that different payment plans are available if you are taking out a reverse mortgage. The payment plans available vary depending on the kind of reverse mortgage you choose. HECMs are by far the most popular reverse mortgage loan and offer multiple types of payment plans. You can go with a line of credit, a lump sum, a term payment plan, or a tenure payment plan. You can also get a combination of a modified or tenure payment plan along with a line of credit. Before you choose, consider your financial needs carefully.

There Are Eligibility Requirements

While reverse mortgages are a fantastic financial tool, they aren't available to everyone. You need to be 62 years of age, and you need to either own your home or have built up a significant amount of equity to qualify for a reverse mortgage. If you are taking out an HECM, you will also need to attend a counseling session before taking out this type of loan. Make sure you meet these requirements before you start your search.

If you are thinking about a reverse mortgage, there are a few things to know. There's more than one kind of reverse mortgage available, and it's crucial to shop around and look into your options. There are also different payment plans available. Consider which type will benefit you the most. Finally, make sure you meet the eligibility requirements for this kind of loan.