Reverse Mortgage Loan Blog

A reverse mortgage has the potential to make retirement more pleasant and financially secure than it otherwise might be. An increasing number of seniors find themselves “house rich, cash poor.” While seniors have enjoyed rapidly appreciating home values, their incomes may have failed to keep pace with healthcare costs and general living expenses. A reverse mortgage may solve this problem and also provide many other benefits.

So, what is a reverse mortgage? A reverse mortgage enables homeowners, age 62 and over, to convert the equity in their homes to cash, without selling the property. The homeowners retain title and all the responsibilities of home ownership, such as taxes, insurance and maintenance.

Of course, the homeowners or their heirs do have to repay the loan, plus interest and fees, but that usually doesn’t happen until death, sale of the home or if they stop living there permanently (perhaps to live in a nursing home). At no point are the borrowers or their heirs responsible for more than the price for which the home is sold, and any equity in the home that remains after the reverse mortgage is paid off goes to the heirs/owners.

Reverse mortgages provide the following features. The reverse mortgage payments you get aren’t taxed, since they’re loan proceeds, not income. Reverse mortgages can be set up as a lump sum payment, fixed monthly payments, a line of credit, or any combination of these. Homeowners may change their plan as their needs change. The borrowers can never be forced to leave their homes so long as property taxes and insurance payments are maintained. The amount of a reverse mortgage you qualify for depends on factors such as your age, the level of interest rates, and value of your home. Income and credit history are not considered. This is a great advantage for seniors who do not qualify for traditional loan products.

Reverse mortgages provide the following benefits. A reverse mortgage can enable people to cope with the costs of their health care or other aspects of their life, or to use the money to improve their lifestyle. It can reduce a senior’s reliance on investment income. All mortgages, home equity loans, or other liens on the house are paid off. This reduces monthly costs for the homeowner. Reverse mortgages are not limited for use by “house rich, cash poor” seniors. Very affluent individuals can make use of a reverse mortgage as an estate-planning tool. By purposely encumbering their home, seniors can lower their taxable estate. The loan proceeds can then be used toward the purchase of tax-free wealth transfer insurance. Although the affluent individual has little need for the money, they receive the double benefit of less estate taxes and passing on more to their heirs.

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