Reverse mortgages allow retirement with financial freedom
Reverse mortgages provide an incredible opportunity for seniors to take control of their retirement, while allowing them to age in place in their own homes.
Through a lump sum, line of credit, monthly stipend or a combination thereof, homeowners can utilize the equity in their homes to secure their financial future, plan for unexpected medical bills, free up room in their budget, or even enjoy hobbies and travel.
Let’s explore what reverse mortgages are, who qualifies and what the benefits are, as well as address possible objections and dispel the myths about the program.
A reverse mortgage allows a homeowner to leverage part of their equity into loan proceeds based on their age, interest rate and appraised value. When the home is sold, the heirs keep any profit while the Federal Housing Administration covers any loss, so there is no financial burden on the borrower’s family. These loans are also structured to ensure that seniors have the continuing funds they need and are less likely to see their loan amount exceed their property value, even during periods of turmoil in the housing market. Also, the funds homeowners receive through a reverse mortgage aren’t considered income, so the money isn’t taxable and won’t interfere with Social Security income restrictions.
To qualify for a reverse mortgage, at least one homeowner must be 62 years old. A larger percentage of equity is available to borrowers of increased age. The borrower must complete an educational session with a U.S. Department of Housing and Urban Development-approved counselor to ensure they are fully aware of their options and responsibilities with a reverse mortgage. Applicants must also be prepared to maintain their home, and continue paying their property taxes and homeowners insurance.
No matter how much equity you have in your home, a reverse mortgage could provide the financial solution you need. Borrowers who own their homes free and clear or have substantial equity can convert that equity to a line of credit they can access whenever they need it and/or establish continuing monthly allotments to bolster their retirement income. Homeowners with limited equity can pay off their current mortgage and eliminate that large monthly payment from their budget.
If your current home no longer suits your needs and you want to downsize, it’s even possible to purchase a new home with a reverse mortgage.
As you approach retirement, ask yourself a few questions. What is your planned monthly budget? What is your current mortgage balance and what is the market value of your home? How long do you plan to live in your home?
Despite the outdated belief that reverse mortgages are designed to rob older homeowners of their houses and their heirs of their inheritance, these loans were created to help seniors age in place, in the best environment for them, and to maintain their financial independence. If a reverse mortgage sounds like the right choice for you, contact a loan originator who will review your unique financial situation and calculate the options to best fit your personal retirement needs.
