Reverse Mortgages

According to the U.S. Department of Housing and Urban Development, a reverse mortgage is a special type of home loan that allows the home owner (who must be age 62 or older) to convert a portion of the equity in their home to cash. The cash can be received as a lump sum or in monthly payments. Although there is often much misunderstanding about reverse mortgages, especially among seniors, this type of loan can be an excellent strategy and financial resource for those who wish to remain in their home, but require care and assistance to stay there.

There are several benefits to reverse mortgages, primarily that the money does not have to be repaid until the homeowner stops using the home as their primary residence. Many seniors require some level of assistive care, but have no funds on hand to cover the cost. With a reverse mortgage, the cash from their equity can help pay for care, allowing them to remain at home rather than moving in with family or to a facility.

Investigating Reverse Mortgages

Here are some of the key points to consider when investigating a reverse mortgage:

1. A common concern with the reverse mortgage is “Can I be forced out of my house?” With a reverse mortgage, the homeowner will never be forced to move out, even if all of the equity is depleted.

2. The reverse mortgage industry is government regulated, reducing the incidence of fraud.

3. If the homeowner passes away, any remaining equity in the home can still be passed on to heirs.

4. With some reverse mortgages, there are little or no upfront closing costs, allowing fees and costs to be paid at the end. Some have the option of financing them and having them paid from the proceeds of the loan. Because reverse mortgage fees can be higher than those for a standard mortgage, it is important to review all associated costs to ensure that you have a full understanding of what to expect and that you are comfortable with all the terms of the loan.

5. The homeowner must be living in the home to qualify for a reverse mortgage. And, they must continue to live in the home — they cannot move into a nursing home or assisted living facility while receiving a reverse mortgage.