What Are the Advantages of a Reverse Mortgage?

Reverse mortgages are increasingly popular with seniors who have built-up equity, self-employed contractors, or business owners who may not be eligible for a conventional loan because they cannot prove their income with W-2s or pay stubs.

But is a reverse mortgage right for you? And are there any glaring downsides to reverse mortgages? We’ll tell you everything you need to know here.

Reverse Mortgage Advantages

Increased Flexibility

Reverse mortgages are versatile, allowing homeowners to pull equity from their homes without the burden of monthly payments. This is appealing for borrowers who wish to relieve financial stress or a resource for other borrowers who want to free up capital and reinvest.

Stop Mortgage Payments & Stay in Your Home

Reverse mortgages enable borrowers to stop monthly mortgage payments, stay in their homes, and gain access to capital they can use for any purpose. However, we should mention that while borrowers may discontinue monthly mortgage payments, they are still responsible for paying property taxes, upkeep expenses, and homeowner’s insurance.

Reduce Default Risks

Unlike home equity loans, where balances are paid out over time, reverse mortgage balances are paid once the property is sold to a new owner. Thus, your home cannot be foreclosed on for non-payment.

Never Owe More Than Your Home is Worth

Another appealing feature of reverse loans is that borrowers will never pay more than the home is worth when the loan is repaid. This feature is especially advantageous in unstable markets or a subprime mortgage crisis like many experienced in 2007-2010.

Tax-Free and No Restrictions

The money you receive from your reverse mortgage is generally tax-free and without restrictions. So whether you receive capital in monthly installments or a single sum, you will not pay taxes on that income. Plus, you can use that money however you want.

Backed By the Federal Government

While it is unlikely that your mortgage lender will default, the Department of Housing and Urban Affairs backs reverse mortgages like the Home Equity Conversion Mortgage (HECM). That means your mortgage is federally insured, which gives you increased protection if your lender defaults.

Maximize Your Wealth

Perhaps you need additional resources to supplement your retirement funds or you are facing unexpected expenses that are straining your finances. A reverse mortgage freezes your monthly mortgage payments, allowing you to access your home’s equity instead of tapping into your savings or relying on high-interest credit cards.

Nikkael Home Loans: Your Reverse Mortgage Specialist

Want to learn more about reverse mortgages? Nikkael Home Loans has 60 years of combined experience in mortgage law, loan origination, and home protection. Plus, we’re attorney-owned and operated, so we have a higher level of ethics and accountability than you might find elsewhere. We can help you find what works best for you. Request rates and get started today!