Benefits of Reverse Mortgage Reverse mortgage benefits are ideal for many older homeowners, allowing you to stay in your own home while gaining financial peace of mind. Learn more.
Because seniors often do not have the income to qualify for traditional home equity lines of credit, they are unable to access the wealth they have accumulated in their homes without selling the property and relocating. Reverse mortgage critics often tell seniors to sell their home and relocate.
But why should seniors not have the opportunity to stay in their home?
It is common for seniors to have trouble finding affordable housing without moving far from their support network. Reverse mortgages are designed to help people manage their personal finances, while affording a senior, who wishes to age in their home, the chance to do so.
A Reverse Mortgage May Be The Answer
A reverse mortgage enables older homeowners (62-plus) to convert part of the equity in their homes into tax-free* cash without having to sell the home, give up title, or take on a new monthly mortgage payment. The reverse mortgage is aptly named because the payment stream is "reversed." Instead of making monthly payments to a lender, a lender makes payments to you. The homeowner does have a few important obligations with a reverse mortgage, including paying property taxes, insurance and any HOA dues, as well as maintaining normal and customary upkeep of the property.
The funds you are eligible to receive depends on your age (or the age of the youngest spouse in the case of couples), the appraised home value, interest rates. In general, the older you are and the more valuable your home, the more money you receive.
*Consult your local tax advisor.
The Benefits of a Reverse Mortgage include:
1. No Monthly Mortgage Payments: Instead of making monthly mortgage payments to a lender, as with a regular first mortgage or home equity loan, a lender may make payments to you. (borrower must remain current on property taxes, homeowner’s insurance and HOA dues as applicable)
2. Non Recourse: Reverse mortgages are "non recourse" which means that no matter how high the loan balance grows, neither the borrower nor their heirs will ever owe more than the home's market value.
3. Stay in Your Home: The home does not have to be sold to pay off the loan. You (or your heirs) can pay off the reverse mortgage and keep the home. There are no prepayment penalties.
4. Estate Planning: If the home is sold and the sales proceeds exceed the amount owed on the reverse mortgage, the excess money goes to you, your heirs or your estate.
5. Available Cash: The amount of cash available from a reverse mortgage depends upon your age at the time you apply for the loan, current interest rates and the type of reverse mortgage you choose.
6. Safety: Reverse mortgages are very safe since you do not give up home ownership and do not owe more than the value of property at the time the loan is repaid. Reverse mortgages allow you to withdraw money from your home equity, tax-free, with no requirement that it be repaid until you pass or no longer live in the home as a primary residence.