Reverse Mortgage

A reverse mortgage can be a great way of “having your cake and eating it too”. Meaning you can get some of the equity from your home without having to sell it. Plus the cash received from it is tax-free.

Let’s look at exactly what it is in a nutshell.

The same as a traditional mortgage with 3 major exceptions:

1. -There is age qualification--both spouses need to be at least age 60 (for Americans it’s age 62) to qualify for a reverse mortgage. (That’s a strict rule -NO exceptions)
2. -You do not need to have, a job, good credit, or any stable income to qualify
3. -You are never required to make any payments- while you live in the home

With a traditional mortgage/line of credit, you would have to begin repaying the loan plus interest.

In the case of these mortgages you receive funds up to (40% of the appraised value of your home). You can live in your home as long as you want to with no repayment of your loan until:

• You and your spouse, both pass away
• You leave to move to a retirement or nursing home
• You decide to sell your home

Otherwise you can’t ever be forced from your home -- leaving it will always be your choice--regardless of the loan’s status.

Some folks do choose to make monthly repayments, but the majority of people -- when they do find it necessary to leave their home --pay off the loan from the proceeds of the sale of the house, take the rest of the money and move on in life. (these mortgages have been around for many years -- and no one that has had one has ever used up all of the equity in their home to pay off the loan-- because as the debt builds, the value of your home increases.)

Example reverse mortgage

Taking the lump sum would mean interest would begin to accrue on the entire amount. If you invested the cash to earn income then the cost is tax deductible.

If you were to opt for an income stream of suppose, $1,000 monthly. This would mean interest would only accrue on the portion that had actually been borrowed so far.

There are issues that need to be addressed before you begin a reverse mortgage. It is not for everyone and once you begin, the cost to opt out can be quite extensive.

No one should rush into a decision, without talking with a financial planner and having a full understanding of what is involved.

Like any successful investment--it is a long term commitment

Return From Reverse Mortgage to Retirement Income

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