What is a Reverse Mortgage?
A reverse mortgage is a loan borrowed from your home’s equity. Home equity is determined by calculating the difference between the appraised value of your home and what you owe on the mortgage. In a reverse mortgage, borrowers maintain the title and ownership of their homes for the entirety of the loan. If you maintain the home and pay property taxes, you cannot be forced to move or repay the loan.
What Can a Reverse Mortgage Pay for?
Reverse mortgages can be used to pay for long-term care expenses, such as:
- Home care services, including help with meal preparation, housekeeping, and activities of daily living.
- Assisted living, memory care, or nursing home care for a spouse or parent.
- Out-of-pocket medical expenses, such as hearing aids.
- Home safety modifications to help with aging in place, such as a wheelchair ramp or walk-in shower.
- Adult day care services or respite care.
What are the Pros of a Reverse Mortgage?
- You don’t have a mortgage payment. One of the biggest benefits is that it eliminates monthly mortgage payments, and instead provides additional income.
- You own your home. You’ll be able to live at home and keep full ownership if you maintain the home and pay the required insurance and taxes.
- The payments aren’t taxable. Reverse mortgage payments aren’t taxed and don’t affect Social Security or Medicare benefits.
- Your reverse mortgage may be federally insured and protected. A HECM (available to homeowners over 62) is managed and insured by HUD. This provides peace of mind that you’ll still receive payments even if your mortgage lender defaults.
- You have financial flexibility and security. You can use payments from a reverse mortgage for anything you need, now or in the future.
What are the Cons of a Reverse Mortgage?
- It can be quite costly to establish a reverse mortgage.
- The interest rate is typically variable.
- Unlike a traditional mortgage or home equity loan, the interest on a reverse mortgage is not tax deductible.
Still have questions? Contact us today at 414-727-8181 or send an email at [email protected].