Benefits of a Reverse Mortgage
Benefits of a Reverse Mortgage
There are countless reasons many seniors today are choosing reverse mortgages to help them during retirement. If you qualify for a reverse mortgage, there are no stipulations regarding how you can spend proceeds from the loan. The money is yours. You’ve worked hard. Spend it however you wish. Whether you use the additional income to pay for medical bills or buy the boat you’ve always dreamed of, the cash is at your disposal, and the non-recourse terms of the loan never change.
For seniors with home equity, reverse mortgages offer plenty of benefits:
HECM reverse mortgage loans are insured by the federal government as non-recourse loans. In short, this means the borrower will never owe more than they can pay off through the sale of the home. Neither the homeowner nor their heirs will ever be burdened with unmanageable debt from the loan, even if property values drop. Any remaining equity at the end of the loan will go to the ones you choose. If you have a Will or Trust, the proceeds will go to your family, loved ones, charities, etc.
Income is Tax-Free
Reverse mortgage income is tax-free, and it won’t be counted against any income-based benefits you may be entitled to. It can affect any needs-based income you may be receiving, but call us about this. Often this just takes planning to ensure you are still able to receive the needs-based assistance program funds.
Remain Living in Your Home
Most seniors want to continue living in their homes as long as possible, but if there isn’t enough retirement income to continue to pay the mortgage, their home can be in jeopardy. Reverse mortgages guarantee that the borrower can remain in their home, as their primary residence, as long as they live.
Eliminate Mortgage Payments or Refinance a Bad Loan
If there is enough home equity, a reverse mortgage can be a great way to eliminate burdensome monthly mortgage payments, refinance out of excessive rates, and consolidate credit card or other debt.
The Homeowner(s) Own the Title to the Reverse Mortgage Property
You still own the home and remain on title; nothing changes. Contrary to some misconceptions, HUD does not take your home. Prior to 1998, this did happen, but this has not been the case since it became an official program under HUD. If you get a reverse mortgage on your home, it simply acts as a refinance; you still own the property and can sell or refinance again if you choose. At the end of the loan (when the last person passes or it is no longer their personal residence) the property title is not handed over to the lender. When the reverse mortgage homeowner or borrower no longer occupies the property, the loan becomes due. HUD gives the borrower or Heirs 6 months to sell the property or to refinance and pay off the loan balance to HUD. Two additional 3-month extensions are available if applied for prior to the end of the previous extension(s).
Downsize or Relocate to a New Primary Residence
Reverse mortgages for purchase are exactly like regular reverse mortgages, except they are used to purchase a new residence. Just as you would go get a loan to buy a new home, you can use the Reverse Mortgage as your loan to purchase your new home. There are a few ways this transaction can work, but either way, you will have no mortgage payment when you complete the home purchase. This is ideal for seniors looking to get additional income by downsizing to a smaller or more affordable home, or for those wanting to retire near kids or grandkids.
There are countless ways reverse mortgages can bring retired seniors financial freedom. Some of the most popular ways homeowners enjoy the income from this loan include:
- Eliminate your mortgage payment
- Pay off credit cards
- Pay medical bills or for in-home care
- Home improvement projects
- New car, new boat or other recreation
- Improve the quality of life
- Buy a new home
- And many others.