In recent years, the prices of homes have gone up, but the returns on investments have been low. Because of this, a lot of seniors find themselves in a situation where they have a nice house but not much money. Seniors who are short on money are looking for ways to make more money in retirement while still living in their own homes. These retirees don't have many choices, and most of the time, they have to put their home at risk. The reverse mortgage, on the other hand, can be a lot better than these other options.
Reverse mortgages don't have any payments.
The best thing about a reverse mortgage is that you don't have to make payments as long as you live in the house. In fact, this is the main reason why older people get reverse mortgages. Almost 80% of people who get a reverse mortgage use it to pay off their other loans so they don't have to make house payments anymore. Say you owe $50,000 on your first mortgage and use a reverse mortgage to borrow $80,000. This would pay off the first mortgage and get rid of the payment. You would then have $30,000 to use as you wish.
You can stay in your house as long as you want.
The second benefit of reverse mortgages is that you can stay in your house for as long as you want. The good thing about this is that you can never owe more on the reverse mortgage than the house is worth. Let's say you live to be 115 and choose to get $300 a month from your reverse mortgage for the rest of your life. Even though the amount you owe will only be the value of your home, the amount you get from the reverse mortgage payments could be a lot more than the value of your home. In this case, the difference will be paid for by FHA insurance.
Options for Getting Out of a Reverse Mortgage
You can choose from different ways to get your money out of a reverse mortgage, which is another benefit. You can get a lump sum, a line of credit, or monthly payments, or you can get any combination of these three. So, if you were eligible to borrow $100,000 through a reverse mortgage, you could choose to get $30,000 up front to cover current expenses and keep the rest as a line of credit that you can use whenever you need it. This flexibility of reverse mortgages can give you a lot more freedom with your money when you retire.
Reverse mortgages are not taxed.
Another benefit of a reverse mortgage is that the money from the loan is not taxed. In general, the IRS does not count loan advances as income, according to the American Bar Association's guide to reverse mortgages. This means that all of the money from the reverse mortgage goes straight to you.
With all of these benefits, reverse mortgages are definitely something to think about if you want to add to your current income. As with any financial decision, you should talk to a trained professional, like a reverse mortgage counsellor, to figure out if a reverse mortgage is right for you.
