A common question these days is "what is a reverse mortgage"? We will go into some of the details to give you a better understanding.
Let's start with a definition. A reverse mortgage is a loan that uses your property and home as collateral. It is really that simple. But this always seems to raise questions so let's dig a bit deeper.
Most reverse mortgages these days are FHA or HUD insured loans, but proprietary reverse mortgage products come about occasionally.
I want to talk about a reverse mortgage not so much a thing, but as a feeling. The clients we have helped over the years do not see the loan as a thing, but as a solution to so many feelings. Examples of the feelings I am speaking of are:
Trust me when I tell you this list is a short version of the emotions that a senior feels when the budget is too tight. And with the rising cost of just about everything, the budgets are only getting tighter.
So after bringing all this up, the next question you want to ask is probably the same one that we started with. What is a reverse mortgage? There is no way to fully describe one in a document, since every situation is different, but here's a go at it.
A reverse mortgage is relief, freedom, comfort and independence all rolled into one big happy ball. The way a reverse mortgage works is it uses the equity in your home to bridge the Social Security gap. It fills in where the retirement pensions left off. It helps you afford necessities and if you are lucky, maybe some extras.
You can use the funds you receive how you like, so in addition to paying for the necessities, you can travel to visit family or buy a second home or buy a new vehicle. The one restriction is that it is taboo to use the proceeds of your loan to purchase annuities.
A reverse mortgage is not a solution for everyone. If you have enough money in your retirement to live a healthy lifestyle, then you may not need one. But evaluate whether or not your definition of healthy retirement is correct. You should be able to afford electricity and heat, and not have to go hungry at night. It is easy to become accustomed to your lifestyle, and say "we do fine". But in reality, if you can't afford your home or the medications you need along with the previously mentioned items, then it might be time to re-evaluate your situation.
If you are wondering can the reverse mortgages be all good, let me suggest you check out our page on what are the reverse mortgage disadvantages. You will gain a different perspective.