Are you looking to secure your old-age life by achieving financial stability? Explore the benefits of reverse mortgages and how they can secure your future.
In your 50s, sitting on your chair with a cup of coffee in one hand and newspaper in the other, you will be thinking, “What’s next?”
Your retirement age is near. You have seen your kids grow. What is the next move to pleasantly live out your life? One of the first things that may strike your mind is making investments for profitable returns.
How about investing in a real estate property? This can make you eligible for a reverse mortgage to bring profitable returns.
It is a mortgage loan for homeowners aged 62 and over. Reverse mortgages give access to funds and borrow money against your home equity.
Yes, you would be thinking, “In other types of mortgages, there’s usually a monthly payment involved. What will be the monthly expense to keep the reverse mortgage going?” The answer to your questions is, “No monthly payment is needed.”
If you meet the criteria of a reverse mortgage, you can benefit from it.
Here are some of the major requirements for a government-backed mortgage that can secure your retirement years.
We have told you about reverse mortgages and their requirements. But before we move towards the reverse mortgage pros and cons, are we forgetting something? An important question that you would want to know?
Yes. How do you get paid when opting for reverse mortgages? Here are some payout options you have.
You can get the entire loan at the same time.
Allows you to turn your home equity into a credit line and allows you to withdraw money when needed.
It allows you to have a fixed monthly amount that you will receive every month for a specified period.
The reverse mortgage loan offers amazing repayment flexibility. As long as you are staying in the property, you don’t have to worry about loan repayment.
Here are the conditions when your loan becomes due.
If you find a buyer to buy your home and decide to sell your property, you can use the proceeds to pay off the reverse mortgage loan.
You still own the home, but you decide to live in another property, which becomes your primary home. When that happens, you need to pay back the mortgage loan.
When you die, the lender issues a formal notice to your heir that they are about to sell the house and use the proceeds to finance the reverse mortgage. Your heir can arrange finances to keep the property.
Now that the introduction is done, we will move on to why you are here to know about the reverse mortgage pros and cons.
First, here are some benefits you might want to know about.
The reverse mortgage allows you to generate income without working or having a job. This can help you cover the major expenses to improve your living standards.
An additional plus of a reverse mortgage is that, unlike your job, this is a reliable income source that you can count on.
You can easily get frustrated by paying taxes on almost every payment. Well, the reverse mortgage is not on that list.
You might be taking home cash, but IRS sees it as an advance loan, which is non-taxable income.
Suppose you bought your home when its value was $200,000. But when moving out of the home, your home value decreases to $160,000.
Reverse mortgages require you to pay according to the current home value. So, you will be paying back the loan with the home value being $160,000.
At an old age, relocating houses can be challenging. One of the reasons why you may be tempted to home is to earn a profit from the sale. But now that you have accessed the reverse mortgage, you don’t need that extra income.
With the income coming in, you will have more reason to stay in your home and build higher home equity.
We are sure you would have liked the benefits of a reverse mortgage. But we are supposed to talk about the reverse mortgage pros and cons.
Let’s look at some potential downsides of opting for a reverse mortgage.
When you are approaching your retirement years, you might be peace of mind that, “I have my retirement benefits like Medicaid and Supplemental Security Income.”
But the thing is, going for a reverse mortgage might make you ineligible for various need-based government programs.
Pro Tip
We suggest talking to a HECM counselor and getting clarity before going for a reverse mortgage.
The reverse mortgage pros and cons are only for you. Your heirs would not be a big fan of it because they will be burdened with debt if you pass away. They will be faced with the difficult choice of repaying the mortgage or vacating the home for the lender to sell.
Reverse mortgages mean you are bound to make the current property your primary home. You cannot go on extended vacations or move to a secondary home for a long time. Why? The reason is that you need to prove to the lender that you are still using the home as your primary residence.
And as you are living in one home, you will still need to pay the homeowners’ expenses when living in the property. Remember, you don’t have as much income as you did previously, apart from the reverse mortgage funds.
If you don’t make those payments, your home can be foreclosed.
You now know the reverse mortgages pros and cons. This can ensure a smooth transition toward your retirement and tell you what factors to guard against.
If you want more information on accessing a reverse mortgage against your property, we will be happy to hear from you. At HAR, we are a reputable real estate to help you make fruitful investments.
The lenders send a notice to your heirs about their intentions to sell the real estate. They also have the option to keep living in their home by arranging the required finances. If they don’t, the lenders can sell the property and use the proceeds to cover your loan.
The reverse mortgage loan is based on the current property value and market conditions. If your property depreciates and the proceeds don’t meet the loan, your heir or family won’t be asked to pay the difference.
Your lender will need you to pay off any debt before approving your reverse mortgage. You can pay through your savings or even use the reverse mortgage funds to pay out any outstanding mortgage.
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