When you apply for a reverse mortgage, also known as a HECM home equity conversion mortgage, you are essentially borrowing money from some of the equity you have built up in your house.
One great advantage of a reverse mortgage is that you are not required to make monthly payments until you no longer occupy the home. If you have a reverse mortgage you must be able to pay property taxes, homeowners’ insurance, other applicable property charges and occupy your home.
So how can you tell if a reverse mortgage is a good solution for you?
Here are three factors to consider.
Will you outlive your money?
You may be on a fixed income. This might include social security, pension, and or retirement funds that distribute monthly payments. You might have part-time employment, or significant retirement funds which can carry you well into the future. You might tap into a reverse mortgage to either eliminate a current mortgage payment, provide additional cash flow, or both. Your budget, your health, and your long-term financial plan all hold the key to understanding if you will outlive your money. Proper planning can provide for a long economically stable future. A reverse mortgage might be able to help hedge those odds.
Have you looked at retiring with all the possible financial options?
Is there a nest egg? If yes it is common to consider a reverse mortgage for cash flow while funds under management continue to grow. It is common to use a reverse mortgage as a strategic plan in advance of taking SSA income at 70. Often homeowners use the reverse mortgage to create a line of credit for future use only or for emergencies. This is not the loan of last resort! This is a viable option to use home equity in ways that support your goals and needs.
It is also an excellent tool to use to eliminate a mortgage payment and free up that cash flow for other purposes.
Are You Planning to Stay in your home for the foreseeable future?
If a home sale is in your immediate future, consider a HECM for Purchase but if not then a reverse mortgage refinance can also solve many problems. This loan is best utilized on a long-term basis. Borrowers who want to stay in their home long-term benefit from a potentially growing line of credit or cash flow otherwise being paid out on traditional monthly mortgage payments, and the real comfort of living in the home of their choice.
To learn more about reverse mortgages, contact your local certified Reverse Mortgage Professional (CRMP) for guidance and expertise.