Reverse Mortgages have been around for more than 40 years. But as any 40-something-year-old, they’ve seen lots of changes over time.
How could YOU benefit from a Reverse Mortgage loan?
- You have financial peace of mind and can maintain your independence.
- You can live in your home for as long as you choose.
- You never make a monthly mortgage payment on the loan (but must continue to pay your property taxes and homeowner’s insurance).
- You and your heirs have no personal liability for repayment of the loan – only the home can stand for the debt under a “non-recourse” loan.
- You retain ownership and control of your home (as long as you comply with the loan terms).
- Your loan proceeds are non-taxable.
- Depending on the type of loan you select, you decide how to receive your loan proceeds, and can change your election anytime through the life of the loan, before loan proceeds are exhausted. Choose from: lump sum, line of credit, term, tenure, or any combination thereof.
- If you elect a credit line, the unused portion of the credit line grows for the HECM loan.
- You can repay your loan at any time without penalty.
Innovative Uses of a Reverse Mortgage Loan
Purchase long term care insurance.
Long term care insurance pays for necessary medical or personal care service provided outside of a hospital setting, such as in a nursing home or the policy holder’s home. Many financial planners recommend that their clients purchase long term care insurance to help fund prospective medical and care costs. Typically, Medicare supplemental insurance does not cover the cost of services.
Using Reverse Mortgage to pay for long term care insurance can be an important part of asset protection for you and your heirs.
Purchase a life insurance policy.
While we have NO connection to the insurance industry (and could not assist you further), we understand that purchasing a insurance policy with some of the proceeds from your Reverse Mortgage loan could make it possible to maintain some of the legacy you had planned to leave to your heirs. A properly structured life insurance policy can pay out a benefit to heirs in tax-free dollars.
You can provide your heirs a guaranteed sum, providing greater control of your estate. This may be especially desirable given the unknown nature of future real estate markets and property value at the time of your passing.
Postpone Collecting Social Security
For young retirees, a Reverse Mortgage may be used to supplement income and forestall initiation of social security payments that are then substantially larger at an older age.
For example, a borrower who would have been eligible for $1700 monthly social security benefit at age 62 may be eligible for a benefit of $3100 at age 70. Using a Reverse Mortgage for cash needs during the interim period can be extremely beneficial to the borrower. While closing costs may seem expensive, the payback period is short (differs in each individual situation) compared to increased Social Security proceeds over a lifetime.
How does a Reverse Mortgage differ from a home equity loan?
While both loans enable you to turn equity into accessible dollars, you must make regular monthly payments (as soon as your loan is funded) to repay a traditional home equity loan. Therefore, you must qualify for the loan based upon your income and credit. If you fail to make timely payments, your lender can foreclose on you and you can be forced to sell your home.
With a Reverse Mortgage, you do not have to repay the loan until you no longer live in the home. Your income is not considered when qualifying for the loans, although there is a financial assessment to see if you qualify. You cannot be forced to sell your home if you cannot make a payment since THERE ARE NO REQUIRED PRINCIPAL AND INTEREST PAYMENTS! But you must always comply with the terms of the loan such as continuing to make property tax and homeowner’s insurance payments.