Reverse Mortgages: A Retirement Strategy

Saving for retirement can be a daunting task, and even with the best plans a shift in the market, or a sudden emergency can throw the finest tuned plan askew. If you’re finding yourself coming short on your retirement savings, but own you own home, there is an option that you may not have thought about, or even be aware of: A Reverse Mortgage.

So what is a Reverse Mortgage? With a reverse mortgage, a lender makes payments to the homeowner based on a percentage of the value in the home. When the homeowner dies or moves out of the property, one of three things can happen:

  1. The homeowner or his/her heirs can sell the home to pay off the loan
  2. The homeowner or heirs can refinance the existing loan to keep the home
  3. The lender can be authorized to sell the home to settle the loan balance.
senior mortgage rates

While there are several types of reverse mortgages, including those offered by private lenders, they generally share the following features:

  • Older homeowners are offered larger loan amounts than younger homeowners. More expensive homes qualify for larger loans.
  • A reverse mortgage must be the primary debt against the house. Other lenders must be repaid or agree to subordinate their loans to the primary mortgage holder.
  • Financing fees can be included in the cost of the loan.
  • The lender can request repayment in the event that the homeowner fails to maintain the property, fails to keep the property insured, fails to pay its  property taxes, declares bankruptcy, abandons the property, or commits fraud. The lender may also request repayment if the home is condemned or if the homeowner adds a new owner to the property’s title, sublets all or part of the property, changes the property’s zoning classification, or takes out additional loans against the property.

This is a great option for many homeowners, but is something that should be discussed with the family as there may be additional burdens passed onto children, and there are many factors to consider.

The fact is that even if you feel there are no options, you just might not know about what is available to you or will work for your specific situation. If you are concerned for yourself or a loved one please speak with your financial advisor about options and learn as much as you can about retirement options. Or call us today at 1-866-982-2737 and speak with some about setting up an at home care assessment today.


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