Using a reverse mortgage may make sense for a lot of baby boomers who will not have sufficient retirement savings when they finally retire. And with the uncertainly over Social Security and the compelling arguments that benefits will most likely change in the next few years, a reverse mortgage may be the product that allows boomers to have a comfortable retirement.
For some folks, the only true valuable asset may be their home with a low mortgage or no mortgage. A reverse mortgage converts your home equity into tax free proceeds and the owners retain title to their home. The reverse mortgage payments do not count towards Social Security and Medicare. The payments can cover living expenses, long term health care, home health care etc... It can be an important and necessary safety net for those folks with limited savings. Here are some facts about how a reverse mortgage works:
- Qualifying is not dependent on income, health, employment or credit score
- Only available for folks age 62 and over
- Must have a low mortgage balance or no mortgage balance
- Must attend a counseling session with a HUD approved agency so that you are fully informed of how a reverse mortgage works and also look at other options
- Can be taken as a lump sum, monthly annuity or line of credit
- Upon death, the beneficiaries will need to pay back the loan and the interest if they are keeping the house. If selling the house, all monies need to be paid back from the sale.
Please be aware the Reverse Mortgages are expensive--the fees are high. However, the benefits can be huge to folks who simply do not have enough funds to live a comfortable retirement.
In summary, a Reverse Mortgage can be a viable option in retirement in providing needed tax free income. Make sure that you do your homework and know all the ins and outs of how this works before entering into a binding contract.
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