Is a Reverse Mortgage good for retirement?
In the last three decades during which I have been providing financial guidance, there has been a tremendous increase in the types of investment instruments available for people planning their retirement. One of the most powerful investment products that have emerged in the last few years is the new reverse mortgage, officially called a Home Equity Conversion Mortgage or HECM, and only available through an FHA approved lender. Yes, I know that reverse mortgages have been around a while, but for several reasons, this new generation of loans for homeowners 62+ is more attractive than ever.
For a majority of Americans, their home equity is their biggest asset. So a reverse mortgage that can safely and inexpensively provide access to that equity should be given serious consideration as a part of the retirement strategy. That’s what a loan like Zoom Reverse™ is designed to accomplish. It provides the cash-out benefits that were always available through reverse mortgages but achieves that goal through a fast, easy approval process with very low closing costs, which was an issue with reverse mortgage products in the past. There’s even a zero closing costs option depending on the structure of your loan. And as a HECM, a Zoom Reverse is insured by the U.S. federal government.
To review reverse mortgages. A reverse mortgage is a specific type of mortgage loan that allows homeowners who are 62 or older to convert their home equity into a lump sum of cash, or monthly payments, or a line of credit from which to withdraw cash whenever needed. All these cash payouts are tax-free. The borrower has no obligation to repay the lender ever, as long as the home is not sold off or vacated.
Bottom line – With a reverse mortgage, the homeowner gets a cash payout or a monthly cash stream that can be used for emergencies such as medical costs or simply to improve the quality of life during retirement. These payouts are never paid back and the homeowner continues to live in the home and keeps the title. The homeowner is still responsible for the taxes and insurance on the home.* And the whole thing is insured by the U.S. government.
Sidebar, in a shaded box:
Is a Reverse Mortgage good for you? Judge for yourself.
With a reverse mortgage
- The homeowner doesn’t have to worry about making periodic mortgage payments to the lender ever again. On the contrary, with a reverse mortgage, the homeowner can receive funds every month for life from the lender or take a lump sum payout.
- The federal government insures the reverse mortgage, which protects your interest. If you ever want to sell your home and the loan amount exceeds the amount received from the sale, the difference is covered by the federal government.
- You can choose a payout option for your reverse mortgage loan depending on your needs. Your options include monthly payments, a line of credit, and partial/full lump sum payout, or any combination of these plans.
- A reverse mortgage does not affect your Medicare and Social Security benefits because a reverse mortgage is not considered to be income.
- A common misconception about reverse mortgages is that the lender takes over the home’s ownership. Not true! You continue to own the house and keep the title as long as taxes and insurance are paid and necessary maintenance is kept up.*
- The lender can not force the borrower out of the home and your heirs do inherit the equity remaining in the home after the loan is paid.
- A reverse mortgage is tax-free. Check with your accountant, but if taxes are a concern a reverse mortgage is good to consider.
If you are 62+, retired or about to retire, or even if you’re still working, and your goal is to lower your monthly overhead and increase your monthly cash flow, a new generation reverse mortgage like a Zoom Reverse mortgage is good thinking. It might be exactly the solution you are looking for. Certainly in this era of instability in the equities markets and rising cost of living, particularly health care costs, a reverse mortgage can be a safe, predictable source of cash flow and increased financial security. It makes good financial sense to explore all your options and a reverse mortgage is definitely worth your consideration. Personally, I strongly recommend anyone approaching retirement age to give a reverse mortgage serious thought.
At Zoom Reverse by United Mortgage you can find specialized reverse mortgage support from an experienced senior staff that can answer any question that I did not cover here. There is free consultation available, during which your individual financial situation can be assessed and the benefits you could personally realize from a reverse mortgage can be calculated.
You can begin the fact gathering process here.
*homeowner must continue to pay taxes and insurance on the home or risk default