Is a Reverse Mortgage Right For You?

From the Senior Helpers newsletter.

If you are a senior who is age 62 or older and you are living in fear that some day, when you need help, you’ll have to sell your house to pay for it, there is a solution. You may still be able to stay in your home while paying for home care, home improvements or medical bills.

How? If your home is paid off or you have only a small mortgage left, you can get a reverse mortgage to tap the equity in your home without selling or moving. These mortgages are called reverse mortgages because the lender makes payments to you, the homeowner, not the other way around.

The money you will receive is tax-free and will not affect Social Security payments or Medicare benefits. You do not have to pay off the loan until you move out of the house or the home is sold. You will never owe more than the value of the home at the time of repayment, even if the loan balance is higher than the value of your property. No debt will be passed on to your heirs. Reverse mortgage funds are available to spend any way you choose.

Who Is Eligible?
To be eligible, you must be 62 years or older. (If you are a married couple the youngest partner must be age 62.) You must also either own the home outright or have a low mortgage balance that can be paid off with the proceeds from the reverse loan. You must also live in the home. Like all homeowners, you still are required to pay your real estate taxes and other conventional payments like utilities.

Cautions and Things To Remember
• Be sure to work with a reputable lender, consult with your financial adviser if you have one, and do your homework before you make any commitments or sign any documents.
• Investigate the costs involved in a reverse mortgage before making the decision. Closing costs and fees may amount to more than 5% of your home’s value.
• If you plan to live in your home for more than three years, a reverse mortgage can make good financial sense. However, if you know you won’t stay in your home that long, then the cost of the loan plus interest may make seeking a reverse mortgage an unwise choice.
• Using the equity in your home will reduce the amount of money you leave to your family as inheritance
• If you live alone and need to stay in a nursing facility for more than a year, your loan will come due.
• It takes 45 to 90 days to apply for and receive a reverse mortgage. It may be better to receive one when you do not urgently need the money for immediate home repairs or in-home care.
For More Information
The AARP offers information about reverse mortgages, including an online calculator you can use to find out how much money you may get from a reverse mortgage.

The National Reverse Mortgage Lenders Association (NRMLA) includes information for consumers interested in learning more about reverse mortgages

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