Do you worry about how you will retire at an age that isn’t 90? Most people with an average income do. You may not have huge savings or 401K. Many don’t. However, today’s homeowners are using a reverse mortgage to plan a secure retirement.
What is a reverse mortgage?
A reverse mortgage is a loan that is available to homeowners over the age of 62 that will allow them to convert part of the equity in their home into tax-free cash. As long as these homeowners comply with the terms of the loan they do not have to make any monthly mortgage payments.
Here are 5 FAQs about Reverse Mortgages
- When you have a reverse mortgage, who owns your house (whose name is on the title/deed)?
You remain the owner of your property. There is no change to the deed or title of your home when completing a reverse mortgage.
2. When you have a reverse mortgage, do you have to make a monthly mortgage payment to the bank?
No, but for tax or cash-flow purposes, including Medicaid planning, you may wish to do so.* Remember, you are always required to pay home expenses, such as taxes and insurance, and maintain the home. *This is not tax or financial advice. Please consult your tax or financial advisor for your specific situation.
3. If you took all of the money from the reverse mortgage in a lump sum and spent every bit of it, would you be able to go on living in your home?
Yes, your reverse mortgage will not become due until you pass away, sell your home, are no longer living in the home as your primary residence, or fail to comply with loan terms. If you use all of the available proceeds, you will not have any more money available, and interest will continue to accrue.
4. If you get a reverse mortgage, how does that change the amount of money that you will leave to your children (or other heirs)?
Most likely, it will decrease the amount of money the heirs will receive from the value of the home. However, your overall net worth has the potential to get better, depending on what you spend from your other investments/accounts. Because this is not financial advice, however, you should consult your financial advisor about how a reverse mortgage can work best for your specific situation.
5. What if I live in Florida for half the year?
That’s fine; you just need to live in your primary residence for six months and a day.
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