What is a reverse mortgage?
Reverse mortgage, or home equity conversion mortgage, is a method through which you can convert equity locked in your home into tax-free-cash. You can get this cash without having to make monthly mortgage payments. The funds you get can be used for anything, including paying off bills, using it for a vacation, or using it to pay off your existing mortgage. This is in addition to, eliminating credit card debt, medical bills, or simply living a better life.
Types of Reverse Mortgages Available
This reverse mortgage is in place to help seniors 62 or older, who own their own home, get cash without making monthly mortgage payments. The HECM standard unlocks equity in your home by turning it into tax free cash.
HECM saver is the same as the HECM standard. The main difference is that the lower upfront costs, and the lesser amount you are able to borrow against your home. The amount is usually 9-19% less. HECM saver borrowers can opt to receive funds as a lump sump, a line of credit, or monthly payments that are disbursed as long as you continue to live in the home. The funds are advanced to the borrower, and interest accrues on the loan. The amount isn’t repaid until the borrower leaves the home.
Reverse Mortgage Pros/Benefits
- Retire in the comfort of your home
- Pay off your existing mortgage
- Eliminate monthly mortgage payments
- Get tax-free income, (the funds from a reverse mortgage are tax-free)
- Choose how you receive the funds
- Safe government regulated solution to access money
- Leave your home to your heirs without sacrificing your quality of life
- Use the money however you want, no restrictions ever
- Easy to qualify, there are no credit score requirements or financial history requirements
- Get up to $625,000
- No obligation to repay the loan while you are alive
Reverse Mortgage Cons/Disadvantages
- The loan isn’t free. There are closing fees involved
- The loan balance increases due to interest
- Medicaid can be affected by this
- It is not tax deductible
- You pay for property taxes and insurance
- Mandatory counseling
- You pay for FHA appraisals
- You have to stay in the home