Is a Reverse Mortgage Loan for you?

What Is a Reverse Mortgage Loan?

A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage loan, is a federally insured home loan that allows borrowers age 62 and over to access a portion of their home equity to supplement their retirement income. Like their traditional cousins, reverse mortgage loans have financial obligations, requirements and qualifications, but repayment is structured differently. Whereas traditional loans require borrowers to make loan repayments each month for a designated period of time, reverse mortgage loan borrowers aren’t required to make monthly mortgage payments, so long as they pay property taxes, homeowner’s insurance and comply with loan terms. Instead, non-taxable loan proceeds are made available to the homeowner to use at their discretion, such as paying off other expenses, building up a financial buffer for future unanticipated expenses, or planning for the retirement of their dreams.

How Can a Reverse Mortgage Help with Retirement Planning?

According to American Advisors Group (AAG), there are many features of reverse mortgage loans that can benefit seniors who are looking to supplement their retirement income.

• Eliminate monthly mortgage payments. Rather than paying money to the lender each month, you receive funds to enhance your retirement savings. The loan is repaid when you sell your home, move to another primary residence or when the last borrower leaves the home.
• You remain the homeowner and stay in your home. You maintain ownership of and the title to your home as long as you comply with the terms of the loan.
• How you spend the proceeds of the loan is up to you. The loan proceeds have very few restrictions and can be used to pay for common senior expenses like medical care, in-home care, household repairs and remodeling, or paying off other debt. Disbursement options vary: you choose a full or partial lump sum, monthly payments or a line of credit.
• Social Security, Medicare, your 401(k) and pension are not affected. A reverse mortgage loan is considered a loan and not income, so proceeds are not taxable. However, need-based benefits such as Medicaid and Supplemental Security Income (SSI) may be affected.

Want to know more? Click here to read the full article from AgingCare including:
*How to qualify for a Reverse Mortgage Loan
*What are the obligations as a borrower?
*How Does the Government Regulate HECM Loans?
*How to Apply for a Reverse Mortgage