Reverse Mortgages and Paying for Retirement

Unfortunately, some seniors may realize too late that they have not saved enough money for retirement. One option for some may be a reverse mortgage, which is a special type of home loan that allows the homeowner Nutrition Articles 2019 to convert the equity of their home into cash. A reverse mortgage is technically called a Home Equity Conversion Mortgage (HECM); they are administered by the Federal Housing Association (FHA).
To qualify for a reverse mortgage or HECM, the applicant must be a senior at least 62 years of age and own their home or have a very low balance on their mortgage that can be paid off within the loan. The applicant must also live in their home, whether it is a single family home or a multi-unit home where the applicant lives in one of the units. Certain condos or manufactured homes may also be eligible. There are no income requirements to qualify for a HECM, unlike a traditional home equity loan or line of credit.
The purpose of a reverse mortgage is to give the borrower extra income to supplement other financial sources such as investment income, retirement accounts, or Social Security benefits. The proceeds from a reverse mortgage can be used to improve quality of life and help the borrower pay for home health care. If the borrower moves to a retirement center or nursing home, they no longer qualify for a HECM since the home would not be their primary residence.
The amount that can be borrowed depends upon many factors, including the age of the borrower, the current interest rate, and the appraised value of the home. When the borrower dies or sells the home, the loan must be repaid in full.
There are five options to receive payments from a reverse mortgage:
1. Tenure – equal monthly financial payments as long as the borrower uses the home as their primary residence
2. Term – equal monthly financial payments for a set amount of time
3. Line of Credit – payments can be received as needed until the line of credit runs out
4. Modified Tenure – a combination of line of credit and monthly Chemotherapy Side Effects payments as long as the borrower lives in the home
5. Modified Term – a combination of line of credit plus fixed monthly payments.
For the senior homeowner, a reverse mortgage can be an excellent way to pay for home care.