There has been increasing promotion regarding reverse mortgages lately. Even ads with Tom Selleck are showing up. I guess the NYPD commissioner add validity to the offers.
But what are the advantages of a reverse mortgage?
The first and most obvious is no monthly mortgage payments. If monthly cash flow is an issue, this could be very important. Homeowners are not required to make monthly mortgage payments. Instead, the loan is repaid when the borrower sells the home, moves out permanently, or passes away.
Second, it allows homeowners access to equity. With the raise in home prices over the last two decades, some homeowners may have quite a bit of equity that is mostly inaccessible. A reverse mortgage allows homeowners to convert a portion of their home equity into cash. This can be especially useful for retirees needing additional income to cover living expenses, medical bills, or other needs. It can even be used for capital improvements or remodels.
Third, using proceeds received from the reverse mortgage are typically tax free as they are considered loan advances and not income. The majority of the accessible equity is set up as a line of credit which is then an add on to the mortgage loan.
Fourth, borrowers retain the title to their home and can continue living in it as their primary residence. They must keep up with property taxes, homeowner’s insurance, and maintenance.
Fifth, borrowers retain title to their home and can continue living in it as their primary residence. They must keep up with the property taxes and home owners insurance as there can be no escrow account.
Sixth, reverse mortgages offer various ways to receive funds: as a lump sum, monthly payments, a line of credit, or a combination of these options. This flexibility allows borrowers to choose the best method for their financial situation.
These features make reverse mortgages an attractive option for eligible homeowners seeking financial flexibility and security in retirement. Or for those on fixed income looking for some relief from cash flow worries,
