For a retiree on a fixed income and a budget, carrying debts that require monthly payments can be difficult and create financial stress. With high interest rates, these monthly payments often do not reduce the principal owed in meaningful way.
Whether the debt consists of high-interest credit cards, automotive debt or no-interest medical debt, if your monthly payment obligations are taxing the limits of your monthly budget, a reverse mortgage may offer some breathing room by allowing the debts to be paid off and the monthly payments to be eliminated.
How A Reverse Mortgage Works
- Cash received from the reverse mortgage can be used for any purpose.
- Amounts received from a reverse mortgage are not subject to income tax
- The homeowner continues to own the home and can pass on the property at death.
- Reverse mortgages do not require monthly payments;
- Reverse mortgages do not require repayment until i) The borrower no longer lives at the property; ii) The borrower sells the property; or iii) The borrower fails to uphold the terms of the mortgage;
- The homeowner will continue to pay home related expenses such as insurance, property taxes and HOA dues as normal.
Eligibility For A Reverse Mortgage
The homeowner must be 62 years or older to qualify for a government insured Home Equity Conversion Mortgage (HECM). Age limits can vary for non-government insured reverse mortgages with the youngest age for qualification being 55.
How A Reverse Mortgage Can Help Manage Debt
The proceeds of a reverse mortgage can provide the money to pay off existing debts and eliminate the monthly payment. This can immediately improve the financial position of the homeowner and their ability to manage their retirement. Key advantages that a reverse mortgage may provide include:
- Elimination of monthly payments;
- Increased monthly cash flow that can be used for other purposes;
- Reduced Stress; and
- Improved Financial Control
Other Features Of A Reverse Mortgage
- Ownership of the home and all future appreciation
- Reverse mortgages are secured by the home, the same as a traditional mortgage.
- A reverse mortgage is non-recourse for the borrower
- The homeowner can pass on the property to anyone they desire
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We may be able to help you improve your financial position through proactive mortgage planning. For anyone interested in learning how home equity can be used to improve their financial position contact Wayne Tucker at 303-468-1985 or at wtucker@spectramortgage.com.
