There’s a lot in the news – and even facilitated by a few paid and recognizable faces – getting the message out regarding reverse mortgages. Are they a viable solution for retirees looking to get out from under credit card debt?
What It Is
Reverse mortgages, in its simplest definition, is a way to turn the equity locked into one’s home into tax free cash without adding mortgage payments to a homeowner’s budget. The funds can be used for almost anything. It can be used to pay off an existing mortgage -and in fact, if there is a mortgage, part of the funds must be used to pay it off – and it can also be used to pay off credit card debt, medical bills and even to put money back in the bank. With retirees facing uncertainty with economic pressures, for many, this is a way to enjoy their retirement years without worrying about their finances.
Government Insured
Another important aspect of a reverse mortgage is the fact that it’s a government insured loan. This is an important element that builds confidence in these programs. The homeowner never relinquishes ownership and qualifying for these loans is easy to do.
How It Works
As mentioned, the homeowner maintains ownership. There are no credit requirements, either. The loan is repaid once the last remaining borrower moves out of the home. Normally, the home is sold, the loan (including interest and any fees) is repaid, and any remaining equity goes to you or your heirs.
Many are concerned that there won’t be an inheritance left for their children. If one’s home is part of that inheritance, and if they choose to keep the home, they can pay the loan back by refinancing the reverse mortgage or by paying the loan off using other resources. If they choose to sell the home, they are given 12 months to do so.
Clearly, this is a viable solution for those looking to enjoy their retirement without worrying about credit card debt or medical bills. It’s also a way to put cash back for unexpected events. More than half a million Americans have already taken advantage of a reverse mortgage and financial analysts say this number is sure to grow.
If this is something you’re considering, be sure to discuss it with those familiar with how it works so that you’re making a completely informed decision.
