If you have been living in the same house for your entire life and find that you have a decent amount of home equity, you may consider getting a reverse mortgage. Though a reverse mortgage is not for everyone, it is a great way to have a little extra money available during your retirement, so that you can live comfortably.
You can find reverse mortgage programs all over the U.S., but you have to make sure that you are one of the people who qualify for it. Reverse mortgage is a type of loan that allows a homeowner to convert their home equity into their mortgage payment.
Reverse Mortgage Simplified
Reverse mortgage, also known as a home equity conversion mortgage (HECM), is a complex procedure that typically requires the help of a professional. In the simplest terms, it takes your home equity, or the market value of your home that has accumulated over the years, and converts it into loan payments. The interest of this equity is added to the loan balance every month, which will allow you to free up some funds to spend on something else.
Of course, reverse mortgage is exclusive to people who are at least 62 years of age, have no existing liens, have no delinquent federal debts, and live in that house as their primary residence. They must own the property outright or only have a very small mortgage payment left.
You will still have to pay property tax, homeowners insurance, association fees, repairs, and other financial obligations, but at least you will not have to make monthly mortgage payments.
A Comfortable Retirement
The key benefit of a reverse mortgage is that you enjoy increased retirement security. Since your house equity is paying for your loan, you are left with more income during your retirement. Use these extra savings for anything you wish, whether it is to pay for additional medical expenses, living assistance, home repairs, or debt. You can even use it for vacations.
Reverse mortgages are free of taxes, and you can even maintain ownership of your home and pass it on to your descendants. Of course, one downside is that the reverse mortgage may lower the value of your home, since it can eat up a significant portion of your property’s value. Remember that it will impact your children’s inheritance.
Of course, if you do not have children or feel that inheritance is less important than being able to fund your retirement fully, this will not be much of an issue. Enjoy all the benefits of having extra money in your old age and have a comfortable, happy retirement.