What is a Reverse Mortgage?

A reverse mortgage can help you stay in your home after retirement while adding to your monthly income.

Variables such as your age, the value of your home and current interest rates all impact how much you will benefit from a reverse mortgage.

Many home owners at one point or another ask themselves “What is a Reverse Mortgage?” While not for everyone, a reverse mortgage can be a great way to stay in your home during retirement while benefiting from a continuous cash flow.

Why get a Reverse Mortgage?

  • Increase your income stream
  • Tap into equity while still maintaining home ownership
  • No monthly payments…instead, the lender pays you

Wondering if you’re prepared for retirement?

A reverse mortgage just might be the tool that gets you there. Reverse mortgages can help to insure a comfortable retirement by offering monthly payments or a lump sum from the mortgage lender. Essentially the lender pays you to stay in your own home. You need to be at least 62 years of age to qualify, and variables such as your age, the value of your home and current interest rates all impact how much you will benefit from a reverse mortgage. The older you are generally equates to a higher payout, especially if your home value is up and market interest rates are down. 

What are the downsides to a reverse mortgage? 

Simply put, many borrowers find the cost of the loan prohibitive. While every mortgage loan has associated expenses involved, (appraisal fees, title insurance, processing fees, etc.) and generally cost a few thousand dollars, the expenses associated with a reverse mortgage can be quite a bit higher. Expected closing costs can run in the neighborhood of $30,000-$40,000. Of course these fees are rolled into the loan itself, but many people view the fees as too high when compared to the monthly dividends they will receive from the lender. Keep in mind the lender does not take the title to your home, the reverse mortgage is considered to be a lien against the property similar to other mortgage loans. With this in mind, another aspect to consider is if you needed to leave your home for more than one year (assisted living situation or family considerations), then the entire loan would become due. In addition, there is the obvious equity loss as the lender pays you each month. 

How do I apply for a reverse mortgage?

An alternative to selling your home, a reverse mortgage provides a way to maintain your current living situation and secure a comfortable retirement. An investment professional can help to dispel the mystery and misconceptions about reverse mortgages, so you can determine if one is right for you.