Retirement is often seen as a luxury, where you become as free as you’ve ever been. However, we often don’t think about the financial struggle some seniors have after retirement, whether it is that they do not have enough savings to provide for themselves over the long-term and are unable to go to back to work, or whose savings value has decreased in a spontaneous recession. In either situation, reverse mortgages for seniors are worth consideration.
What Are Reverse Mortgages?
Reverse mortgage loans allow elderly homeowners to convert part of their home equity into cash. In other words, homeowners can use the wealth already invested into their homes to help pay for necessities like healthcare or basic living expenses, which is especially helpful if retirees have a limited income. Reverse mortgages are named as such because the lender makes payments to the borrower, whereas a traditional loan has the borrower make payments to the lender.
The Pros of a Reverse Mortgage
* Some of the value of your home can be turned into cash, without you having to sell it. You also still own your home.
* You don’t have to make any regular payments. In fact, you don’t have to pay at all until you’re no longer living in your home.
* You can choose how to receive the money, through
* Line of Credit – a standby line of credit that borrowers can access only when they need the funds.
* Term Payment – fixed monthly payments for a specified amount of time. The monthly amount received will not change over this fixed time, even if your estate’s value decreases over time.
* Tenure Payment – fixed monthly payments for as long as you live in your home. The payments will only stop when you leave your home, or you pass away.
* Lump Sum – one full payment that is of lesser value than what you may qualify for.
* Or modifications of any of these methods.
The Cons of a Reverse Mortgage
* At your death, your estate must pay the loan and interest in full within a limited time. Settling an estate can take far longer than repayment of a reverse mortgage.
* There will be less money to leave for your children and other heirs.
* This loan has an additional fee, compared to other loans, called a Mortgage Insurance Premium. It means you pay more, but with the insurance that you do not repay more than what your house is worth at the time of its sale.
If reverse mortgages for seniors interest you, you can learn more Longbridge Financial, LLC.