Why Do You Need Reverse Mortgages?
Today, seniors like you who belong to the baby boomer generation must be preparing for financial changes after retirement. You may be feeling that you need a secure source of income which will protect you from escalating prices and unpredictable circumstances in your future years. True, you have Social Security benefits that will take care of some of your expenses, but will this be enough in a world where the cost of living is spiraling? Perhaps you have decided to start a new career after retirement to keep earning enough to live comfortably. But for those of you who want to break free from daily work schedules post retirement, opting for reverse mortgages is a safe way of ensuring financial security.
Reverse Mortgages: How it Works
First, you need to understand that Reverse mortgage is the exact opposite of a normal mortgage. In a mortgage loan, you borrow money to buy your home and repay a fixed amount at regular intervals to the lender. A portion of your payback goes towards paying the interest and the remaining goes towards paying back the principal amount. Until the loan is completely repaid, the lender holds the ownership of your home.
In Reverse mortgage, you are allowed to convert a portion of the equity in your home into cash. This equity is paid to you over a period of time. But unlike a traditional home equity loan or second mortgage, you do not need to repay the amount you have borrowed until you no longer use the home as your principal residence.
Also, your income-to-debt ratio does not influence the mortgage in any way.
- The money that you get from Reverse Mortgages is tax-free.
- If you go for a federally insured Reverse mortgage, it is perfectly safe.
- You own your home for life and your heirs will receive the remaining equity.
- You do not need to pay the loan repayment or payments as long as you live in your home.
- You do not need to show income, medical or credit proofs.
- You can use the money for multiple purposes, like paying for sudden hospital expenses, education costs of grandchildren, or home repairs.
- Even if you don’t have a first mortgage insured by the Federal Housing Administration (FHA), a Reverse mortgage from the US Department of Housing and Urban Development will automatically become FHA- insured.