Reverse home mortgages have increased in popularity over the years. Introduced in 1989, a reverse mortgage is a unique type of home equity that provides lifetime tax-free income to people aged 62 or older. With reverse home mortgages, senior homeowners that have large amounts of equity of home ownership have a way to tap into this asset without worrying about making any monthly mortgage payment, when they live in their own home.
Who Qualifies for a Reverse Mortgage?
You qualify for a reverse home mortgage if you meet the following conditions:
- Your age must be 62 or older.
- Your home must be and remain your primary residence. You must live there.
- There can be no other liens on your home.
- Your home must be in good condition. It will be appraised during the loan approval process.
Who Can Benefit from a Reverse Mortgage?
You are likely to benefit from the reverse home mortgage if you:
- Are struggling with the payments of a conventional equity line of credit or mortgage.
- Need or would like extra cash to cover rising expenses.
- Would like to access the equity in your home for medical needs, a new car, needed repairs, or other expenses.
- Are not planning to relocate from your home in the foreseeable future.
- Would rather share your assets with children/grandchildren while you’re still around, instead of leaving the home’s equity in an estate.
- Are facing foreclosure due to your inability to pay your current mortgage. In this situation, the reverse mortgage is an excellent option (if not the only option) that allows you to remain in the home.
- Are a senior who simply wants to use your money instead of leaving it behind.
When May a Reverse Home Mortgage Not Be for You?
The initial closing costs of a reverse mortgage include special insurance. Although these costs are defined by the government, you need to consider them. Closing costs do come out of the proceeds, but they instantly affect the equity remaining in the home. This is not a short-term program. The initial costs are usually considered reasonable when averaged over a longer period of time. However, if you are looking to relocate from your home in a short period of time, then other options may be better for you.
If you’re already comfortably meeting your financial desires (except for potential estate planning purposes), then there is really no reason for you to consider using a reverse mortgage.
Just like long-term care insurance, a reverse mortgage is not for everyone. But it is worth considering as a part of your retirement strategy. It comes with many benefits such as increased cash flow, and liquidity in terms of stock market downturns. But you must weigh the benefits against the costs and eventual deposition of the home.
If you’re not sure if a reverse mortgage is a good idea for you, contact Karen Douglas today to discuss your needs and options that may fit your life.