Your retirement years are supposed to be your “golden years.” That nickname should conjure up images of fun and excitement. However, it may conjure up images for you of a distinct lack of gold, or at least a lack of income.

When you retire and have a fixed income, simply making ends meet can be tough. However, a reverse mortgage can help you, if you own your own home.

What a Reverse Mortgage is and How it Works

A reverse mortgage is essentially a home loan that pays you. When you apply for one through a reverse mortgage lender, you can set up the payment terms by which the lender will pay you.

Any money you receive does not have to be paid back for a long time. In fact, early repayment is discouraged.

You can only get a reverse mortgage if you are 62 years of age or older. That is why it is also sometimes called a retirement mortgage.

The purpose of it is to allow you to spend part of the value of your home to make your retirement easier. At the same time, you can continue owning your home without fear of eviction.

Read also: 6 Best Passive Income Ideas for Extra Cash

How a Reverse Mortgage is Paid Back

When you take out a reverse mortgage, you can opt to be paid installments on an ongoing basis. If your reverse-loan lender pays you such installments, you do not have to pay any of them back immediately.

You can spend them however you wish to make your retirement easier. However, the loan balance is subject to accrual of interest.

For as long as you remain a permanent resident of your home, a reverse mortgage does not have to be paid back in full. Although, you may opt to make small payments to lower your balance, if you are financially comfortable doing so.

When you leave the home, the entire remaining balance with interest must be paid in order for the home to stay in your control or the control of your family. Failure to pay the balance will allow the lender to oversee the sale of the home.

How Much Money a Reverse Mortgage Can Give You

What You Need to Know About Cash-Out Refinance Loans

There is no easy way to know exactly how much money you can borrow with a reverse loan. A reverse mortgage calculator has to be used to make that determination.

Current market values, government rules and other factors will influence the total. The reverse mortgage calculator tool takes those factors into account. After the tool is used, your lender will tell you the total amount available to you.

The reason reverse mortgage calculation is required is home equity is a very fluid thing.

It can easily change based on economic trends, structural damage, and any existing mortgages you may have on the property.

Government regulations for reverse mortgages are also not set in stone. They can change, so understanding the terms at the time of your application is essential.

Read also: How to Prepare Your Home for Sale

How to Apply for a Reverse Mortgage

Applying for a reverse mortgage is not as simple as being 62 or older and having your own home.

The home itself must be mortgage eligible. That means, if you already have a mortgage on the property, it must be paid off using reverse mortgage funds before you can use the remainder of the funds for other purposes.

You also cannot take out a loan on the property unless it is your main residence. Vacation or rental homes are ineligible.

Additionally, you have to pass a credit check and prove you have the capability to pay taxes and care for the home in order to get a reverse mortgage.