The reverse mortgage was created to help widow Nellie Young stay in her home after the death of her husband. Since then, the loan has helped thousands of seniors across the country continue to live in the homes they love, reach their financial goals, and change the way they live their retirement. The purpose of a reverse mortgage can be different for every person.

While it was created to save someone from losing their home, the reverse mortgage has grown into a versatile product that can be used in a number of different ways – including helping clients keep their home.

Using a Reverse Mortgage

We like to put the uses for a reverse mortgage into two categories: immediate needs and future planning. Immediate needs include making home improvements, consolidating debts, purchasing a new home, doing more in retirement, or eliminating monthly mortgage payments – while continuing to pay property taxes, homeowners insurance, and home maintenance costs. A few examples of future planning include creating an emergency fund for unexpected costs or living off loan proceeds while allowing other assets to grow in value. Another option is leaving reverse mortgage proceeds untouched in a line of credit to allow them to increase in value over time.

Choosing the Right Reverse Mortgage Product

There are a few different kinds of reverse mortgages to best help someone reach their financial goals and needs.

The fixed rate option locks the interest rate in at the time of closing and only disburses proceeds in one lump sum payment. This could be a good option for someone who wants to fulfill an immediate need, such as consolidating their debt or paying for a major home improvement.

The adjustable rate option has an interest that changes throughout the life of the loan and has payout options that are a little more flexible. People who get this type of loan can receive their proceeds in a lump sum payment, monthly distributions, a line of credit, or any combination of the three. This s a good option for those with future planning needs. The line of credit option is an especially wise decision for those who are looking to use a reverse mortgage in their retirement planning, to allow other retirement assets to grow or to leave their loan proceeds untouched so they can grow in value over time.

The HECM for Purchase allows the borrower to purchase a home with a reverse mortgage and not have to make another mortgage payment as long as they live in the home and continue to pay their property taxes and homeowners insurance and maintain the home. This is the right option for someone who is looking to purchase a home.

Not a Loan of Last Resort

Though the reverse mortgage was created to help a widow keep her home – and has helped thousands of seniors keep their homes – many people associate this great benefit of the reverse mortgage with negative misconceptions. Some people believe the reverse mortgage is a loan of last resort. This is far from the truth. The reverse mortgage can be an effective financial tool and has been touted by financial advisors and financial news outlets. Another popular reverse mortgage myth is that the lender will own the home, not the borrower. The fact is that the borrower continues to own the home. The homeowner’s name continues to remain on the title.

Is a Reverse Mortgage Right for You?

If you don’t know if a reverse mortgage is right for you, or you are unsure which product would be best for your situation, give our licensed specialists a call. They will see if you qualify and answer any questions you may have. They can also speak with you about your situation and give you a more customized option. We also recommend speaking to your financial advisor.