Why a Reverse Mortgage Loan Should Be Part of Your Retirement Plan

February 10, 2023

By Nikkael Home Loans

If you’re 62 or older, you may be able to convert the equity in your home into cash through a reverse mortgage loan.

Many retirees have used these loans to secure additional funds during their golden years. Here are the benefits of reverse mortgages so you can make an informed decision about your future.

What Is a Reverse Mortgage?

You receive money from a reverse mortgage loan using your home as collateral. You can receive a lump sum, monthly payments, or a line of credit. Unlike other types of loans, borrowers make no payments, though the loan becomes due when the borrower dies, sells their home, or moves out.

The Benefits of Reverse Mortgage

There are many potential advantages of a reverse mortgage. Here are a few of the most notable.

Tap into Funds During Retirement

Retirees often face challenges when it comes to funding their retirement years. But your most valuable asset may be the one you’re sitting in. A reverse mortgage can help you tap into the equity in your home so you can enjoy your retirement years more comfortably.

Age in Place

Home is where the heart is, and a reverse mortgage can give you the funds you need to keep it. So instead of downsizing or moving away from friends and family, you can keep your home while enjoying an extra influx of cash.

Pay Off Your Current Loan

Do you have to pay off your home before applying for a reverse mortgage? No. You might even use the proceeds of a reverse mortgage loan to make mortgage payments or even pay off your home loan early.

Reverse Mortgages Are Tax-Exempt

The money you receive from a reverse mortgage is classified as “loan proceeds” by the IRS, which means that they aren’t subject to taxation like other forms of income, such as your retirement funds.

You’re Protected from Price Fluctuations

Unlike other loans, reverse mortgage loans grow over time.

What happens if the value of the loan exceeds the value of your home? Again, you’re protected from this scenario since organizations like the FHA insure lenders. Neither you nor your heirs will have to worry about paying the balance.

Heirs Have Flexible Options

Your heirs can pay off the reverse mortgage by selling the property, which also entitles them to any equity above the loan balance.

If the debt exceeds the current property value, they can surrender the title to the lender without worrying about the unpaid balance. Or if the property value is high enough, they can refinance the reverse mortgage. Either way, they won’t be put in a corner.

Consider Your Options

As you can see, a reverse mortgage can be a surprisingly flexible way to fund your retirement years. Nikkael Home Loans has 60 years of combined experience in mortgage law, loan origination, and home protection. We can help you find the right solution based on your needs. Request rates to get started today!

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