Switching Gears
Reverse mortgages offer a unique way to move forward
into your retirement with extra income.
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Dorothy, the main character of the movie, The Wizard of Oz, once exclaimed, “There’s no place like
home!” Even in a world much different than the one that existed when The Wizard of Oz was filmed, that
old adage still holds true. If you’ve lived in a home even for a short amount of time, it’s probably filled with
memories that will always be with you. Your walls are filled with pride and covered in photographs which
document life’s many accomplishments. All of these memories, the good and the bad, come together to
form your home. The place you’ve lived, and maybe even raised a family in, has given you a lot over the
years, and with reverse mortgages, it can give you even more.

As many Americans plan for retirement and turn to alternative sources of post work income, one that may
come to mind is a reverse mortgage. The concept of a reverse mortgage is rather simple: someone
pays you, based on the value of your home. There are many options available as to how you wish to
receive this
money. You may choose to take monthly payments, take a lump sum, or receive a line of
credit.  

When you purchased your home you probably had to make mortgage
payments. As you did, you gradually decreased the amount of debt owed and
gradually increased the amount of equity in your home. Reverse mortgages
are the opposite. As time goes by, you gradually receive more and more
money from the lending company. Thus, your debt increases and your equity
decreases.

The purpose of a reverse mortgage is to have an added source of income,
especially if you plan on selling your home near the end of your life or after you
die. It allows you to receive the equity from your home and enjoy it in retirement.
The amount you receive in the reverse mortgage is based on the value of your
home, current interest rates, and your current age. Once you’ve received the
amount your home has been determined to be worth, less any fees charged by
the lender, you then owe that amount to the lender. You can pay that back any
way you wish, but in many cases, the idea is to sell your home and repay the
debt. Often, this is done by an estate after a person passes away and still has
debt. As long as you’re permanently living in your home, you don’t have to pay
the lender back.

Reverse mortgages do have a lot of details and can get complicated, which is
why it’s best to ask a financial professional for advice before looking into them
much further. While they may have a lot of technical details, they don’t have
many requirements. In general, you must be 62 years of age or older, and own
your own home. Those are the two basic requirements of a reverse mortgage.
Beyond that, there are a few other basic things to keep in mind.

Reverse mortgages do have upfront costs, just like a regular mortgage. They
also have monthly service fees. However, all of the money you receive from the
lender is tax-free. To get a better estimate of how much a reverse mortgage
would pay you, it’s wise to meet with a financial professional.

Unfortunately, reverse mortgages aren’t for everyone. Reverse mortgages can
provide a valuable resource to individuals when the circumstances are right, but there are many
considerations to be taken before choosing one, including: fees, restrictions, estate planning
considerations, need for income, other assets, health considerations, insurance coverage, and so on.  
Often times a reverse mortgage is a last resort for income for many individuals and many individuals
decide that reverse mortgages aren’t for them. And in some situations, for instance, if you want the
house to stay in your family for many generations, then it may not be for you.

There truly is no place like home and the reverse mortgage reminds us of that. It’s one of the few places
on earth that can be filled with so many memories. So if a reverse mortgage sounds right for you, contact
a financial professional today and discuss your options for proving the old adage right, “there’s no place
like home.”
Reverse Mortgage