If you are over the age of 62 you should know about an important financial option. That financial option is the reverse mortgage. A reverse mortgage gives you the ability to never have to make another monthly mortgage payment. It allows you the ability to use the equity you have built up in your home. You can use the equity for anything you want. Here are some other benefits of the reverse mortgage program.
No monthly mortgage payments* – One of the most important benefits for people 62 and older who choose to take out a reverse mortgage is the elimination of their current monthly mortgage payment. If you owe anything on your current mortgage, the reverse mortgage pays off that loan and if there are any proceeds left after it’s paid you receive tax-free cash**. For people 62 and older living on a fixed income, eliminating that monthly financial burden can be life changing. However, you are still required to maintain the home and remain current on taxes and insurances.
You still own your home*** – The most common myth with a reverse mortgage is that the bank is now the owner of your home. That is simply not true. Title on a reverse mortgage is no different than any other mortgage you’ve ever had – only the homeowners are on the title.
Insured by the Federal Government – A government-insured reverse mortgage is safe and secure. Reverse mortgages that are backed by the federal government guarantee you will receive your equity. If you decide to take your equity in a line of credit, there is no risk that your available line of credit will be withdrawn.
You can still leave your home to your heirs – If you plan on leaving your home to heirs, you can still do so even if you have a reverse mortgage. If your heirs choose to keep the property, they will have to refinance the entire amount of the existing mortgage balance regardless of the home’s appraised value. If your heirs choose to sell the property and the proceeds exceed the value of the home, they can keep the difference. For cases where the proceeds are insufficient to pay off the loan, then the lender absorbs the difference.
Does not affect your Social Security**** – The proceeds from a reverse mortgage do not affect your Social Security, Medicare or pension benefits. However, if you are on Medicaid, any reverse mortgage proceeds that you receive must be used immediately. Funds that you retain would count as an asset and could impact Medicaid eligibility. We recommend that you consult your financial advisor to get a complete understanding of a reverse mortgage and your benefits.
Improve your quality of life – As mentioned earlier, a reverse mortgage pays off your current mortgage, eliminating your monthly mortgage payment and eliminating the worry of trying to make that payment each month. Imagine not having to make that monthly mortgage payment. If you have additional equity after your first mortgage is paid off, you receive that equity in tax-free cash which you can use any way you wish. You can select to receive your payments in five different ways:
Term payments – Equal sum of money for a fixed period of months or years.
Tenure payments – Like term payments but they do not end until you no longer occupy the home.
Line of credit
Combination of any of the above payment methods. For example, partial lump sum with the remainder paid to you monthly.
So if you are over the age of 62 and are looking to improve your quality of life, the reverse mortgage program can be a great option for you.
*Homeowner is still responsible for taxes, insurance, and property maintenance.
**Please consult with your financial advisor.
***You remain responsible for counseling costs, taxes, insurance and maintenance expenses.
****May affect SSI or Medicaid. Please consult with your financial advisor.