An Easy Way to Access the Equity in Your Home
If you are 62 or older
and own your own home,
you can use a reverse mortgage to convert your equity into tax-free
income - without selling your home. Unlike a regular mortgage, instead
of making payments, you get paid a portion of your equity every month.
Federally-insured reverse mortgages, which are known as Home Equity
Conversion Mortgages (HECMs), are backed by the U.S. Department of
Housing and Urban Development (HUD).
Whether seeking money to pay
grandkids college costs, finance a home improvement, pay off a current
mortgage, supplement their retirement income, or pay for healthcare
expenses, many older Americans are turning to “reverse” mortgages. Even
if you have an existing mortgage balance, the reverse mortgage may pay
off your loan; therefore the payments you now make on your existing
mortgage will be gone.
In a “regular” mortgage, you
make monthly payments to the lender. But in a “reverse” mortgage, you
receive money from the lender and generally don’t have to pay it back
for as long as you live in your home. The loan must be repaid when you
(1) die, (2) sell your home, or (3) no longer live there as your
principal residence. Reverse mortgages can help homeowners who are
house-rich but cash-poor stay in their homes and still meet their
financial obligations. In the HECM program, a borrower can live in a
nursing home or other medical facility for up to 12 months before the
loan becomes due and payable.
Because you retain title to
your home, you remain responsible for property taxes, insurance,
utilities, fuel, maintenance, and other expenses. So, for example, if
you don’t pay property taxes or maintain homeowner’s insurance, you risk
the loan becoming due and payable.
Interest on reverse
mortgages is not deductible on income tax returns until the loan is paid
off in part or whole. The proceeds of a reverse mortgage are generally
tax-free. Reverse mortgage loan advances are not taxable, and generally
do not affect
Social Security or
Medicare benefits. You retain the title
to your home and do not have to make monthly repayments on your reverse
mortgage.
For a quote on a reverse
mortgage to evaluate the benefits for you, call us to discuss your options.
