Whether you are retired or not, If you're a senior citizen, 62 or older, and in need of opening up into a source of income to enhance your cash flow either to supplement your income for expenses during COVID crisis, to pay for medical expenses, to meet expenses for your child's school admission, or to pay off your mortgage, then you may consider a reverse mortgage. HECM is the most common and government insured reverse mortgage product available. It enables you to transform part of the equity in your home into cash without having to sell your home or refinance your home.
Reverse Mortgages are more pricier than other types of loans. You make sure you weigh-in the benefits and cost in obtaining a reverse mortgage. If you are strapped short of needed cash and a reverse mortgage is the only option, it may be worth considering. Reverse mortgaging can be much better than drawing from you other investments which are battered right now. The stock market is currently being injured or bruised from the current market conditions. The financial advisers advise not to take the money out of financial investments when the market is going down.
Some other characteristics of HECM reverse mortgage are:
Reverse mortgage payments from the lender is not taxable
Your home is a collateral for the loan, your home is pledged for it
It is a non-recourse loan so does not allow the lender to pursue anything other than the collateral
Full Payment for loan is due when the borrowers no longer live in the home
After paying off the loan from the proceeds of the sale of home, the balance is kept by the the borrowers or their heirs
Reverse mortgage is an option for you to consider when in need. Make sure you involve your heirs and immediate family members in the decision process. Let them know what you are doing and why you are taking this option. Include them in all the meetings with the lender and the loan counselor from the very beginning. There are some duties for heirs when the loan becomes due. You may not be around when that happens. When borrowers pass, the successors will need to decide how they would like to proceed with the ’estate’, i.e. all the money and property owned by the borrower, at death. Your required counseling session with the reverse mortgage counselor is the right occasion to get answers for all yours and heirs’ concerns and questions.
One thing I will mention here, for your peace of mind- That is, reverse-mortgage-heirs do not have to take on the remainder of the loan balance and are not held responsible for paying back the loan. But if the loan is not satisfied, the lender will take the home. The better option for the heirs would be- to sell the home, pay off the loan to take the title and keep the balance of the proceeds, or refinance the loan and pay off the reverse mortgage loan.
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