A reverse mortgage is a type of home loan for homeowners age 62 and older. It allows you to access the part of the equity present in your home without paying the monthly installments.
You don’t have to repay a loan until you sell your home or dead. In this blog, I’ll go over the top benefits of reverse mortgage for seniors.
In the time of COVID-19 when all sectors face financial crisis, reverse mortgage is the best solution. Reverse mortgage offers many benefits to you including financial security. It helps manage all your expenses after retirement.
The best thing with a reverse mortgage is that you can borrow money in lump sum cash, monthly payments, a line of credit, or a combination of all.
With a reverse mortgage, seniors can strategically plan the retirement to live a happy as well as healthy & life with less worries.
Moreover, in 2020, the reverse mortgage in the time of COVID-19 is the best option for homeowners age 62 and older. According to the Federal Reserve report, the opens in a new windowvalue homes in the U.S. increased to $29.2 trillion in 2020.
This rise in the value of home benefits homeowners in many ways and help you secure more money through a reverse mortgage.
Further, the loan advances you get from reverse mortgage are not income and thus reverse mortgage for seniors amount is taxable. Another great thing about reverse mortgage is that you can sell your home with a reverse mortgage at any time.
When you sell home with reverse mortgage, you have to pay back the mortgage balance to the lender for closing the account. After repaying the loan amount with interest, you can keep the rest of the money with you.
Here are the top five benefits a reverse mortgage for seniors.
1. Consolidate High-Interest Debt To Lower Monthly Bills
After retirement, when your monthly bills exceed, then you should look for debt consolidation options. And, the reverse mortgage is the best debt consolidation option for seniors.
This is because it rolls all your debts into a single monthly bill, which is much lower than your previous monthly debits.
Further, the reverse mortgage not only simplifies your monthly payments but also provides relief from big debt by reducing payments. Also, you do not need to repay these loans as long as you live in your home.
How does high-interest debt consolidation work?
Basically, with a reverse mortgage, you borrow cash that you can use to pay off your previous debts. Also, you can choose to pay a single monthly payment by exchanging smaller debt obligations into one.
2. Keep More Money In Your Pocket And Retirement Fund
Reverse mortgage home loan offers financial security to seniors in old age and provides monetary independence to you. It does not make any burden on you as you do not need to repay the loan as you live in your house.
This means there are no monthly EMIs or payments with this home equity loan.
For retirees of 62+ with home equity, the reverse mortgage for seniors has become a better deal in recent years. The money which you get from this loan works as an additional income for you and increases your monthly credits.
You can either use lump sum cash of the HECM funds to pay off your previous debts. Also, you can opt for monthly payments from the lender to increase your monthly income after retirement.
Further, you can spend the money from a reverse mortgage in any way you want. For example, you can go for a dream vacation or can buy a new car for yourself or can renovate your home. It’s a time that you use your home equity to fulfill your dreams and to increase money in your pocket.
3. Dramatically Reduce Your Monthly Mortgage Payments
If you’re an older homeowner and want to reduce your monthly mortgage payments, a reverse mortgage is a solution. This type of home loan allows you to tap your home equity to pay off your mortgages.
With a reverse mortgage, you can first pay off your existing mortgages on the home and then can save the rest of the mortgage balance.
Further, with it you can refinance your existing mortgage debt to eliminate or to reduce monthly payment and free up cash for monthly expenses.
Also, you do not need to make monthly payments on this loan because the balance doesn’t come due until you leave home. But, being the owner of the house, you will be responsible for paying property taxes and repair charges.
4. Buying A New Home Or Renovate An Existing One
Reverse mortgage supplements your fixed monthly income by tapping into your home equity. It allows you to stay in your home while improving your cash flow. With HECM, you can get a fixed-rate, lump-sum amount, or monthly payments.
The best part of the reverse mortgage is that you can use the money to buy a new home. Basically, it forms lien against your home equity.
With this, you can probably buy a new home without draining out your retirement savings in making monthly payments. It is because this type of loan demands no monthly payments from you until you live in the house.
Therefore, you can buy a new home that suits you and fulfill your needs after retirement without losing your savings. Further, if you do not want to buy a new home, then with reverse mortgage money, you can renovate your old house.
It means renovating your home without any stress to repay the loan or without drain out your savings.
5. Paying For Medical Expenses, In-Home Care Services And/Or Long-Term Care
A reverse mortgage gives offers quick access to cash, which is really helpful for seniors in case of any medical emergency. You can use the money from a reverse mortgage to pay your hospital bills and medical expenses.
Further, you can also use the cash from a reverse mortgage to pay monthly payments for in-home care services. For your entire life, until you leave your home or dead, you can use loan money to pay for care services.
Also, the reverse mortgage does not affect your already active Medicare benefits and social security.
What Are The Requirements For Reverse Mortgage?
- The borrower must be of age 62 and older
- You should be the primary residence of your home
- You need to attend a counseling session with the Department of Housing and Urban Development (HUD).
- You must have enough money to pay property taxes, insurance, and home maintenance expenses.
Conclusion – Key Benefits Reverse Mortgage Provides
A reverse mortgage is a Federal Housing Administration (FHA) insured loan that is specially designed for seniors. It enables you to access a portion of your home’s equity to obtain extra funds without paying monthly payments.
Overall, reverse mortgage secure you financially, while helping you live a stress-free life after retirement.
If you want to know more about the benefits reverse mortgage provides, new lending limit and applying process, call Brett.
The process of a reverse mortgage can be complicated, and professionals like Brett can help sort through your situation