“Reverse mortgages are not a good choice for everyone. However, seniors looking to enhance
their monthly income, eliminate debt or, improve the quality of life in retirement can take
advantage of this powerful tool.” -Larry Speir.
By Larry Speir
As a veteran mortgage broker and financial services professional, I am well aware of the reverse
mortgage industry’s poor reputation over the years. Bad actors, shady marketing campaigns and
often biased media coverage have contributed to the public’s suspicions and distrust of this potentially
Fortunately, the industry significantly improved its image and is now recognized by experts as
one of the safest mortgages in America. The 21st Century has seen the advent of tighter
regulations, improved products, and sales materials. These advances have made reverse
mortgages more attractive to seniors looking to decrease debt and increase cash flow in
What is a reverse mortgage anyway?
Reverse mortgages are loans available to homeowners 62 and older with substantial home equity.
The homeowner can borrow against that home value, receiving cash as a fixed monthly payment,
lump sum, or line of credit.
Reverse mortgages differ from traditional loans in several ways, the most notable being that
reverse mortgages do not require you to make monthly payments.
In a reverse mortgage, the loan balance is due and payable when the borrower passes away, sells
the home, or moves out. Unlike in the past, current Federal laws require lenders to structure a loan so that the amount will
not exceed the home’s value. However, if the market tanks or a borrower lives longer than
expected, the borrower, their families, and their estates won’t be responsible for paying the
A reverse mortgage may be a powerful tool that some seniors use as part of their overall
retirement planning strategy. These loans contain features that may be ideal for older Americans who want or need to
supplement their cash flow when they retire.
What are some reverse mortgage benefits?
Your retirement income advisor may suggest a reverse mortgage because of the many benefits
that this type of loan can provide. There is a simple qualification and application procedure.
- Generally, a reverse mortgage doesn’t require you to have a minimum credit score.
- There are typically no minimum income requirements either.
- A reverse mortgage could assist you in paying off an existing mortgage.
You can stay in the home you love. One of the most attractive features of a reverse mortgage is
that it allows the borrower to remain in the house until they pass.
- There are no monthly mortgage payments with a reverse mortgage. Unlike traditional forward mortgage loans, you don’t have to make monthly payments.However, you are required to live in the house as your primary residence and are responsible for all property taxes, insurance, and maintenance.
- A reverse mortgage has flexible terms to fit your needs. Reverse mortgages pay you in several ways, including monthly payments, lump sums, credit lines, or a combination of those methods.
Your heirs can still inherit the home. With a reverse mortgage, your loved ones can inherit the house and keep any equity left after paying off the reverse mortgage.
There are tax benefits. Proceeds from a reverse mortgage loan are not taxable.Your family won’t be upside down. Even if there is a downturn in the housing market, your
heirs will never be personally liable for more than what they sell the home for.
Are there downsides to a reverse mortgage?
As with any significant financial decision, you want to consider all the pros, cons, and long-term implications before getting a reverse mortgage. You should bring your spouse, other family
members, and financial advisor into any conversations you have with a reverse mortgage specialist. Your mortgage specialist can answer all their questions and concerns, allay fears, and
provide clarity about the product and process. As I mentioned, reverse mortgages aren’t suitable for every senior, and you must be aware of a few downsides.
- A reverse mortgage might impact Medicaid or other assistance programs. Getting a reverse mortgage won’t affect your Social Security or Medicare benefits. However, you may encounter
issues with additional needs-based assistance, such as Medicaid. If you have Medicaid or other government programs, be sure to speak with a specialist to determine what problems could arise from a reverse mortgage.
- Fees are usually higher. Costs associated with a reverse mortgage tend to equal those of
traditional FHA mortgages. However, due to insurance costs, these fees are higher than those of
conventional mortgages. But, the insurance costs are the reason for the reverse mortgage’s safety
- Your loan balances increase over time, while the home’s value may decrease. Although your heirs won’t be underwater, they may get little to nothing from the home sale.
Summing it up: Reverse mortgages, while not right for every retiree, may help certain people increase their cash flow and enjoy less stressful, more enjoyable retirements. Reverse mortgages
can help offset unanticipated medical expenses, help pay off or reduce debts, and create money you can give to your heirs now. Reach out to me today, and I can help you determine if a reverse mortgage is a correct tool to help you solve your retirement issues.
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