“This is a loan of last resort.”
The Truth:
It is becoming increasingly more common for senior borrowers with a lot of home equity as well as healthy retirement assets to use a reverse mortgage loan as part of their financial and estate planning. Many senior borrowers are working closely in conjunction with financial professionals and estate attorneys to improve the overall quality and enjoyment of life.
“I won’t own my home with a reverse mortgage.”
The Truth:
You will retain the title and ownership of your home during the life of the loan, and you can sell your home at any time. The loan will not become due as long as you continue to meet loan obligations such as living in the home as your primary residence, maintaining the home according to the Federal Housing Administration (FHA) requirements, and paying property taxes, homeowners’ insurance, and HOA dues, if applicable.
“I heard that I have to pay income taxes on money I receive.”
The Truth:
Funds received through a reverse mortgage loan are tax-free due to the fact that it is not considered income. However, it is recommended that you consult your financial advisor and appropriate government agencies for any effect on taxes or government benefits.
“I already have a mortgage, I can’t qualify.”
The Truth:
Often times, borrowers will use the funds from their reverse mortgage loan to pay off an existing mortgage and eliminate monthly mortgage payments*.
“Someone told me I can only spend the money on certain things.”
The Truth:
The funds from your HECM loan can be used for any reason once any existing mortgage or lien has been paid off. Borrowers have used the proceeds from their HECM loan for a variety of things such as: to supplement their retirement income, postpone receiving Social Security benefits, pay off debt, pay for medical expenses, remodel their home, or gift funds to children and grandchildren. Your home is an asset that you worked hard for. We recommend thoughtful budgeting, along with prudence as the approach to properly enjoying proceeds received from your reverse mortgage loan.
*You must live in the home as your primary residence, continue to pay required property taxes, homeowners’ insurance and maintain the home according to Federal Housing Administration requirements.