When Is a Reverse Mortgage the Right Choice?
Zenith
Zenith Greenwood Village, CO
Published on May 26, 2020

When Is a Reverse Mortgage the Right Choice?

Many people have heard about reverse mortgages but most do not have any idea what one is or who the best candidate is for one. You may have seen a commercial advertising reverse mortgages for seniors but, are they the only candidates for reverse mortgages? And, are all seniors candidates or just those with certain qualifying factors? A reverse mortgage is designed specifically for homeowners that are 62 years or older. The U.S. Department of Housing and Urban Development explains just what a reverse mortgage is, “A reverse mortgage is a special type of home loan that lets you convert a portion of the equity in your home into cash. The equity that you built up over years of making mortgage payments can be paid to you. However, unlike a traditional home equity loan or second mortgage, HECM borrowers do not have to repay the HECM loan until the borrowers no longer use the home as their principal residence or fail to meet the obligations of the mortgage. You can also use a HECM to purchase a primary residence if you are able to use cash on hand to pay the difference between the HECM proceeds and the sales price plus closing costs for the property you are purchasing.”

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Those in or near retirement that have built up quite a bit of equity in their home or own it outright, but do not have enough money saved to maintain their standard of living may be considering a reverse mortgage. It allows the homeowner to have extra cash on hand for living while still staying in their home. If you are debating whether or not a reverse mortgage is right for you, there are a few things that may make the option more attractive. If you need tax-free funds that have no income qualifications, a reverse mortgage may be right for you. Additionally, if you intend to live in the home until you die, and are unconcerned about reducing the value of the estate for your heirs after you die, a reverse mortgage may be appealing. This is important to note because with each payment you receive, that amount as well as the interest will reduce the equity in your home. It could even use up all of the equity in your home.

When you opt for a reverse mortgage you also reduce your taxable estate. It is important to note that you still must pay your property taxes and homeowners insurance. Additionally, it is a requirement of reverse mortgages that you live in the home so if you suddenly have to move out (due to illness or for any other reason), you may have to sell your home to repay the mortgage. Ultimately, a reverse mortgage is only ideal if you need money for cost of living and bills (medical or otherwise) and have exhausted all other options. If you are considering a reverse mortgage, speak to a trusted loan officer to determine what the best step is for you in the long run.

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Zenith
Zenith Greenwood Village, CO
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