Is a reverse mortgage right for everyone?

Any borrower with a reverse mortgage must be at least 62 years old. While the new laws can protect your non-borrower spouse from losing your home if you die first, people who aren't borrowers can't get money from the loan once the borrower dies. A reverse mortgage is a loan that uses your home as collateral. You can use the profits for anything from supplementing your income to paying off other debts and making a large purchase.

Your home will remain in your name and the income you receive will be tax-free, since the money comes from a loan. Plus, no matter how much you owe on a reverse mortgage, you can't owe more than the value of your home (even if your loan balance is higher). For many borrowers, this is the main reason why a reverse mortgage is the best option for them. Access to housing capital funds to pay bills and expenses during retirement or to pay other liabilities can be of great help and alleviate financial concerns.

A reverse mortgage is a special type of home loan only for homeowners who are 62 years of age or older. Watch this two-minute video to see how they work and what to consider before applying. With a reverse mortgage, the amount the homeowner owes increases, not decreases, over time. A reverse mortgage allows homeowners aged 62 and older to convert real estate capital into cash to spend.

Like any home loan, HECM reverse mortgages carry the usual closing costs and require you to continue to pay home insurance, property taxes and basic home repairs. Many older people experience a significant reduction in income when they retire, and monthly mortgage payments may be their biggest expense. While a traditional mortgage is a way to get the funds you need to buy a home, a reverse mortgage allows you to sell your house without having to move. Even if your spouse wasn't a co-borrower of the loan, you can stay home after your death or move to a long-term care facility if you were married when you applied for the reverse mortgage.

In short, the income from your reverse mortgage can provide the value of a comfortable retirement, especially if there are no other options available. HECMs and reverse property mortgages can be more expensive than traditional home loans, and the initial costs can be high. If you own a higher-value home, you may get a larger loan advance with a reverse mortgage. Some reverse mortgage sellers may suggest ways to invest your reverse mortgage money, including pressuring you to buy other financial products, such as an annuity or long-term care insurance.

If you watch television, you've probably seen well-known voices such as actor Tom Selleck who touts reverse mortgages as a valuable tool for anyone retiring. Simply put, a reverse mortgage could cause you to violate the asset restrictions of the Medicaid and Supplemental Security Income (SSI) programs. For example, some sellers may try to sell you things like home improvement services, but then suggest a reverse mortgage as an easy way to pay for them. It's harder to qualify for a home equity loan than for a reverse mortgage because it requires credit and income ratings.

The government calls reverse mortgages “HECM”, which stands for conversion mortgages with home equity, and borrowers must pay an initial insurance premium and an annual premium of 0.5 percent of the outstanding loan to participate. During his working years, he invested his profits month after month in a mortgage and real estate capital. If you're facing the possibility of foreclosure, have health problems, or suffer from a poor quality of life, a reverse mortgage can be a valuable tool to help you get the retirement you want. Contact a reverse mortgage professional from American Advisors Group and take advantage of the free personal consultation they offer.


Harry Lammel
Harry Lammel

Unapologetic lover of life. Award-winning family man. Typical husband and father. Music junkie. Food buff.