Though some may believe that a reverse mortgage loan should be a last resort for financially struggling seniors, homeowners should first consult their financial advisor to discuss their circumstances before making a decision. For some, a reverse mortgage may be a useful planning tool for those who would like to tap into the equity in their home to help provide a financial safety net.
Reverse mortgage loans allow senior homeowners who are 62 or older to access a portion of the equity in their home to supplement their retirement income. Reverse mortgage loan proceeds can be used for any purpose the borrower chooses, such as home repairs, home modifications, medical expenses or in-home care. The borrower still owns the home and the loan does not become due as long as the borrower lives in the home as their primary residence, continues to pay property taxes, insurance, and homeowner association fees and maintains the home according to Federal Housing Administration guidelines.
Borrowers can choose to receive their loan proceeds in a lump sum, monthly payments or in a line of credit. If you choose a line of credit, interest only accrues on the amount accessed through your line of credit.
Reverse mortgage loans aren’t right everyone. Borrowers must be at least 62 years old, have sufficient equity in their home, not be delinquent on any federal debt, must live in the home as their primary residence, continue to pay property taxes and insurance and maintain the home. Before getting a reverse mortgage loan, it is important to:
Get Advice. Talk to your financial advisor to see how a reverse mortgage loan will fit into your retirement financial goals. Determine how your financial lifestyle will change after retirement, if you haven’t retired already. Before getting a reverse mortgage loan, it is required that all borrowers meet with a HUD-approved reverse mortgage counselor. During your session with the counselor, they will explain the process and requirements of the loan and will answer any questions the borrowers may have.
Talk to Your Heirs. If you plan on leaving your home to your children, advise them of your plans to utilize the equity in your home through a reverse mortgage loan. After you pass away, or no longer live in the home full time, the loan becomes due. The loan is most often paid off through the sale of the home. If there is any remaining equity left after paying the loan off, then that remaining equity goes to the heirs. In addition, some seniors find that their children are more interested in knowing that their parents are living comfortably in retirement, than they are concerned about their parents leaving them the home.
Determine What Kind of Loan Disbursement Option is Best for You. If you are struggling to pay utility bills and other daily living expenses, then taking a reverse mortgage loan with monthly payments may be a better option than taking a line of credit. Speaking with a financial advisor or reverse mortgage advisor can help you determine which option is best for you.
Reverse mortgage advisors can help you decide if a reverse mortgage loan is best for your financial situation. Call 866-751-6105 for more information about reverse mortgage loans or use our reverse mortgage loan calculator (located at the top of this page) to get an estimate of the loan amount you could be eligible for.