Today's reverse mortgage loan is a low-interest loan for qualified senior citizens based on the value of their home's equity. Repayment of the loan is deferred until the last qualified family member leaves the property. When this happens, the estate is responsible for repaying the loan with cash or proceeds from the sale of the property. There are a number of very good reasons for taking out a reverse mortgage loan. Here is a rundown of the top seven to consider:
- The Cash You Receive is Tax-Free. Tax-free income is a misnomer when talking about reverse mortgages. The proceeds are a loan and therefore are not taxable as income. Ultimately, the cash you receive has to be repaid with interest.
- Ditch Your Current Mortgage Payments. If you're still paying on a mortgage every month, proceeds from the reverse mortgage loan will be used to pay off the current loan. Once everything is said and done, you'll have a new source of monthly income and will not have a mortgage or home equity loan payment.
- Save Your Home From Foreclosure. Are you at risk of losing your home to foreclosure? Instead of resorting to hard money or balloon loans, reverse mortgages can not only get you caught up on your payments, but payoff the home loan completely. There are also no income or credit qualifications that you'll need to meet.
- Pay for Home Improvements. This type of loan is a great way for qualified seniors to pay for home repairs or home improvements. While the money is yours and can be used for anything you like, putting this type of loan to work on home improvements is a smart move for any senior.
- Pay Medical Bills. Nothing can wreck your budget as quickly as unforeseen medical bills. The annual medicare and prescription drug plan deductibles can be tough to swallow for anyone on a fixed income, and the proceeds from reverse mortgages can give you extra breathing room in your budget.
- Get an Additional Source of Income. Reverse mortgages can grow your income by putting cash in your pocket each month. You'll also eliminate your existing mortgage or home equity loan in the process. The combination of a new source of income and eliminating monthly payments can breathe much needed life into your struggling fixed budget.
- Qualifying is Easy. You can qualify if your age is 62 or older. Your home must be your primary residence. You must have sufficient equity to qualify and not be delinquent on any Federal debts. Once approved, you will be required to maintain your homeowners insurance and any association fees. While applying you will be required to attend a HUD required information session with a government approved financial counselor. Qualified homes include single family, multi-family (2-4 units) and manufactured homes that satisfy FHA requirements.
As you can see, there are many good reasons for taking out a reverse mortgage loan. The proceeds of the loan greatly improve your quality of live with very little risk to the homeowner. You control when and how often you get the money and you retain ownership of your home.