Over the years, reverse mortgage plans have become more enticing for senior citizens needing extra financial support. Reverse mortgages allow seniors to access their home’s equity even if it’s value has not considerably risen. People are looking more towards reverse mortgages every year for additional support on home repairs, health-related needs, etc.
But how does a reverse mortgage work, and is it worth tapping into?
This article discusses reverse mortgages in an easy-to-understand way, and why it may be an excellent option for you.
Let’s get started!
What is a Reverse Mortgage?
A reverse mortgage is a type of loan available to homeowners who are 62 years of age and older.
Reverse mortgages allow you to turn a portion of your home’s equity into cash without selling your home or paying additional monthly fees on the loan.
An interest/balance does still accrue on the loan over time.
However, unlike other mortgage plans, these fees aren’t due until the homeowner sells the home or passes away.
In the event of the homeowner’s passing, the loan debt will then be passed on to the homeowner’s heirs along with ownership of the property.
Who Should Consider a Reverse Mortgage?
Reverse mortgage loans are ideal for retired seniors struggling with living expenses.
These loans create a hassle-free option for individuals in need of additional monthly cash flow without added bills and strain.
If you are 62 years of age or older, a reverse mortgage loan may be a good option for getting back on your feet and stabilizing your monthly living expenses.
Significant Benefits of Reverse Mortgages
- Reverse mortgages allow you to retain ownership of your home –
As long as you remain compliant with your reverse mortgage loan terms and pay your property taxes, you will maintain ownership of the home.
- The money you receive is tax-free –
When you get money back from your reverse mortgage, you will not have to pay taxes on the sum you receive.
- As the borrower, you aren’t required to make monthly payments –
No balance acquired on the loan will be due until the course of the loan agreement is ended by one of the outlined stipulations:
-The homeowner moves to another primary residence
-The homeowner sells the home
-The homeowner passes away
- You gain a reliable stream of income –
By entering into a reverse mortgage agreement, you can gain steady financial funding by choosing one of the following options:
-A lump-sum payment
-A line of credit
-Or a monthly payment made directly to the borrower
- No interest is acquired on unused funds –
If you choose to receive your payments through a credit line, there will be no interest due on unused funds at the end of the agreement.
- Your heirs have the option to opt-out of the debt –
Reverse mortgages are non-recourse loans, meaning you cannot owe more than the home is worth. Your heirs also have the option to walk away from taking on the deed of the house and debt responsibility.
- You are protected if the housing market starts to decline –
Reverse mortgage loans are insured by the federal government, which offers the borrower more security. If the loan debt were to exceed the home’s value when sold, the government would take on the difference, and the loan would be paid in full by the proceeds of the home’s sale.
Get in Touch with an Experienced Real Estate Broker
Reverse mortgages are a great way to bring some security back into your retirement without the additional struggle and financial strain of debt.
If you have found yourself considering a reverse mortgage loan, contact Key Realtors, as we are certified Seniors Real Estate Specialists.
We are more than happy to walk you through the process and ensure that a reverse mortgage loan is the best option for you.