There is still a lot of confusion about using a reverse mortgage in retirement. However, with new revisions by the FHA to their Home Equity Conversion Mortgage product, also known as a Reverse Mortgage, many people are once again considering as an option to supplement retirement income from other sources. The Home Equity Conversion Mortgage is called a reverse mortgage because instead of paying into a loan, as with a typical mortgage product, it pays you cash out of your home equity. And because of this, it is used as a financial tool by savvy seniors who have discovered the benefits of a reverse mortgage in retirement. There are 5 quick things we think you should know about reverse mortgages.
- There are special qualifications that must be met in order to use a reverse mortgage in retirement.
Certain age restrictions, housing and living restrictions, and mortgage limits apply. Overall, the program was designed to benefit seniors who live in their home and do not want a mortgage payment.
- A reverse mortgage and a home equity loan are different
With a reverse mortgage in retirement, there is no monthly principal and interest payments due, like there are with a home equity loan. In a reverse mortgage, property taxes and insurance premiums are required to still be paid, unlike with a home equity loan.
- With a Reverse Mortgage in Retirement, Your Heirs and Estate Are Safe
If you choose to sell your house, or move out of it, the reverse mortgage needs to be repaid. This is usually repaid when the home is sold, out of the proceeds of the sale. Proceeds beyond the value of the reverse mortgage becomes part of your estate, just like other assets. If the value of the home is less than the value of the reverse mortgage, the debt is forgiven through FHA’s program.
- It is important to talk to a trustworthy Reverse Mortgage professional
There are a lot of unique situations and questions that come up when dealing with a reverse mortgage in retirement. Beyond the qualifications, it is also possible that your funds can effect nursing home costs positively. It is important that you know and understand the value of a reverse mortgage in retirement to make the right decisions for your goals.
- How you receive money and how much you receive is unique to you
One benefit of using a reverse mortgage in retirement is that there are options in how you can receive the money, including as a lump sum or payments. The amount received will depend on age, current interest rate and the appraised value of the home. Other factors include how much of the current mortgage, if any, needs to be paid off and/or if a new home is being purchased with the funds.
Are you interested in using a reverse mortgage in retirement to help supplement your income? Do you have more questions? Give us a call today and we can walk through the process and discuss the best options to meet your goals.