Reverse mortgages can help pay bills when you may not have the liquid resources.
Perhaps you have heard of them.
Maybe you understand them fairly well.
Maybe you do not.
What is a reverse mortgage?
It essentially allows you to continue to remain in your home while using it to get tax-free cash equity.
There are no mortgage payments.
The load will not impact your Medicare benefits or Social Security.
Is it the best option for you?
According to a recent The Observer News article titled “Reverse mortgages can be a key component in retirement planning,” this depends on a few facts.
Why do people like reverse mortgages?
As for how you receive the benefits, there are options.
When you close, you could receive cash immediately.
You can also open a line of credit to access the rest on an "as-needed" basis after a year.
You could elect to get payments each month for the rest of your life or for a set period of time.
You could even mix-and-match these options.
You may be able to qualify, even if you have an existing mortgage.
Still, there are some cautions to taking a reverse mortgage.
What are they?
Each time you take a draw on the equity in your home, your loan balance increases.
Fees and interest accumulate.
At the same time, your equity is decreasing.
As a natural consequence, you will be eating into any inheritance for your heirs.
Even if they inherit your home upon your passing, they will need to pay any outstanding balance owed on your reverse mortgage.
Also, the reverse mortgage can only be taken on your primary residence.
What if you move or a title-holder is no longer living in the home?
The reverse mortgage payments will be due immediately.
The fees and closing costs on reverse mortgages are higher than on other loans.
Before you make a decision, you should carefully weigh the risks and rewards.
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: The Observer News (February 15, 2018) “Reverse mortgages can be a key component in retirement planning”