How a Reverse Mortgage Can Help You During Retirement

02/22/2018

You may have heard of a reverse mortgage, but you may not know what it is. The confusion surrounding it may be stopping you from applying for one. However, a reverse mortgage can be a huge help to you during your retirement. It is a special type of loan designed to give retired homeowners like you access to fast cash without the worry of fast repayment. Read on to see how a reverse mortgage can make your retirement easier.

How Reverse Mortgage Money Can be Used

The money you receive from a reverse mortgage lender can be used in any way you can imagine. However, if you already have an existing mortgage you must use part of the reverse mortgage funds to pay it off immediately. Remaining funds can supplement your monthly retirement income to make it easier to pay regular bills. Alternatively, you can use the home equity funds to cover large costs during retirement, such as medical expenses, vacations or home improvement projects.

When You Have to Repay Your Reverse Mortgage

The name “reverse mortgage” may be a bit misleading to you because it may make you think of paying a reverse mortgage lender every month. However, in this case your lender will be paying you. You will not owe the balance back until you sell your home, move out of it or pass away. If the latter occurs before you can pay off the balance your family will be under no obligation to repay it on your behalf. Your reverse mortgage lender will simply take profits from the sale of the home up to the amount owed. Your heirs will receive the remaining profits from the home’s sale, if any exist.

There is no Exact Loan Duration to Consider

If you obtain a traditional home loan you will have a contract stating that you must pay the loan back in set increments for a set number of years. No such agreement exists with a reverse mortgage. Instead, the terms are that you must use the home as your primary residence until you repay the balance. Therefore, your reverse loan can last for any number of years based on your living arrangements. However, you can only obtain one when you reach retirement age, and only if you own your home. Once you obtain it, the duration of the loan will depend on how long you reside in the building in question.

How Home Maintenance is Handled When a Reverse Mortgage is in Effect

If you think you do not have to pay property taxes when you have a reverse mortgage, think again. The bank will not take over care of your home in such a circumstance. You will still own the home. Therefore, you will be responsible for all maintenance costs associated with its ownership and upkeep. Such costs include insurance, taxes and necessary maintenance. If you fail to keep up with some of those costs your home may be jeopardized.

Reverse Mortgages and Financial Planning Requirements

If you are considering applying for a reverse mortgage it is important for you to understand all of the details of such an agreement. A trained reverse mortgage expert can help you with financial planning requirements surrounding your reverse mortgage. For example, if you want the available cash associated with a reverse mortgage but also want to leave your home to your heirs as an inheritance extra planning may be required. A financial planner can help you avoid a situation where your untimely death could lead to your family losing the property. You can also ask the financial planner for other reverse mortgage advice. Once you have a clear picture of how the process works you will be better able to decide if it is right for you.