Use a Reverse Mortgage to Help Fund Your Retirement
A reverse mortgage is one of the few financial tools that allows senior homeowners to access a portion of their home equity to pay off their existing mortgage AND eliminate their monthly mortgage payment for as long as they live in the home. It is an adaptable product that can be used in a variety of ways for different types of borrowers. Homeowners that have a monetary need are able to tailor the product to de-stress their finances, and households with adequate resources can utilize the product a financial planning tool.
Since a reverse mortgage is a loan, the money from it is typically tax-free, whether received as fixed income or in a lump sum.
Two basic forms of reverse mortgages are: (1) the Line of Credit (LOC) option, which ensures easy access to cash when needed and (2) the Home Equity Conversion Mortgage (HECM), the most widely available reverse mortgage is managed by the Department of Housing and Urban Affairs (HUD) and is federally insured.
Low Risk of Default: Unlike a home equity loan, with a Reverse Home Mortgage your home cannot be taken from you for reasons of non-payment – there are no payments on the loan until you permanently leave the home. You must simply continue to pay for upkeep and taxes and insurance on your home. Reverse Mortgage lenders have no claim on your income or other assets.
No Downside: With a Reverse Mortgage, you will never owe more than your home’s value at the time the loan is repaid, even if the Reverse Mortgage lender has paid you more money than the value of the home. This is a particularly useful advantage if you secure a Reverse Mortgage followed by a decline in home prices.
Tax Free: As a Reverse Mortgage is a loan, the money from it is typically tax-free, whether you receive it as fixed income or in a lump sum.
No Restrictions: How you use the funds from a Reverse Mortgage is up to you – go traveling, get a hearing aid, purchase long term care insurance, pay for your children’s college education, or simply leave it sitting for a rainy day – anything goes.
Flexible Payment Options: Depending on the type of loan you choose, you can receive the Reverse Mortgage loan money in the form of a lump sum, annuity, credit line or some combination of the above. With the line of credit option, you can ensure easy access to cash when you need it, such as an emergency or to help a surviving spouse manage cash flow without the stress (or additional cost) of having to refinance later in life.
Home Ownership: With a Reverse Mortgage, you retain home ownership and the ability to live in your home. As such, you are still required to keep up insurance, property taxes and maintenance for your home.
Guaranteed Place to Live: You can live in your home for as long as you want when you secure a Reverse Mortgage.
Federally Insured: The Home Equity Conversion Mortgage (HECM) is the most widely available Reverse Mortgage. It is managed by the Department of Housing and Urban Affairs and is federally insured. This is important, since even if your Reverse Mortgage lender defaults, you will still receive your payments.