Let me start by saying that a traditional mortgage and a reverse mortgage are different loan agreements.
So, what is a reverse mortgage?
Well, let us start at the beginning.
Reverse mortgages (also called Home Equity Conversion Mortgages or HECMs) have been available to home-owning seniors since 1987.
What is their purpose?
According to The Fifty-Plus Advocate article, "Top ways to use a reverse mortgage," a properly implemented reverse mortgage can help you live independently in your seniors years.
Reverse mortgages at their core provide eligible seniors with tax-free cash from converted illiquid home equity. Sometimes properties in life estates or trusts can qualify.
Why do some people consider this a good option?
True to its title, the aforementioned article makes three key points.
The home is yours.
Yes, you still have to pay real estate property taxes and insurance, but these are a small tradeoff.
- You get to stay in your home as long as you live.
- You can sell your house without incurring a penalty, and you get to keep the profits after repaying your reverse mortgage.
There are no monthly mortgage payments.
As long as you live in the home this is true.
Instead of paying every month, you can get paid one large sum, receive a monthly check or draw on a line of credit.
If you are struggling with monthly payments, a reverse mortgage can reduce financial pressure or cover unforeseen expenses.
For more information on whether a reverse mortgage is appropriate for your unique circumstances, you should speak with an experienced estate planning attorney.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Fifty-Plus Advocate (April 26, 2016) "Top ways to use a reverse mortgage"