Reverse Mortgages Are A Great Tool For Senior Homeowners

Dated: 04/19/2019

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Reverse mortgages were once viewed as a last resort for covering retirement shortfalls. It’s true: They can be a good source of income for Americans who are not as well-prepared for retirement as they would like to be. 

But the reverse mortgage, usually a federally-insured Home Equity Conversion Mortgage, can be so much more. The HECM is a remarkable product that allows many homeowners age 62 or older to turn hard-earned home equity into a flexible financial tool! 
Nearly 75 percent of older Americans own homes and have equity in them. The HECM is simply a loan against that equity. The reverse mortgage is available to seniors whether they own the home outright or are still making payments.

To qualify, you must prove you can pay property taxes and homeowners insurance and continue to maintain the property. The Department of Housing and Urban Development, the program's administrator, has added some education requirements. 
You can get the loan as a lump sum, as monthly payments, or as a line of credit. When used judiciously, it can be a valuable and flexible asset. 
Some HECM borrowers put the money into an investment fund, purchase another property, buy a motorhome and see the country or simply squirrel it away for future needs. 
Depending on your age and health, a reverse mortgage may also be a less expensive insurance policy against long-term healthcare needs—and may give you the opportunity to hold off on collecting Social Security. 
Others have used the money to start businesses or buy rental properties. More well-heeled borrowers may use it as a steady cash standby to draw off in times of need, instead of selling off stocks that can be down in value or cashing in CDs. 
And there’s a far simpler benefit available – the ability to live out your days in peace. If you so choose, you can remain in your own home for as long as you like. You don’t have to make another monthly mortgage payment. 
Unless you decide somewhere along the way to move or sell the home, the house is sold to cover the outstanding loan when you and your spouse die. Any profits from the sale go to your heirs. 
If the home sells for less than the amount of the loan, federal insurance picks up the difference. 
Otherwise, a reverse mortgage is not based upon income or assets, just the equity and the home being the primary asset that's being borrowed against. There are associated fees, and everyone’s situation is different. Take the time to talk the options over with your family. 
Tens of thousands have converted home equity into tax-free cash – and millions more could qualify. The significant increase in cash flow and other benefits from a reverse mortgage brings many borrowers financial peace of mind.

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