A reverse mortgage may be the right financial solution for you, but are you concerned about how it may impact your family?
It’s important that you fully understand your obligations. The Department of Housing and Urban Development (HUD) requires applicants to complete a reverse mortgage counseling session as part of the application process. Your family members may attend the session with you. With a reverse mortgage:
- If you sell the home to repay the loan, you and your heirs will never owe more than the value of the property or the loan balance, whichever is less, and no assets other than the house may be used to repay the debt
- Your heirs inherit any remaining equity after paying off the HECM loan
- A HECM loan should not affect your eligibility for Social Security and Medicare benefits1
What else is important for you—and your family—to know regarding reverse mortgages? You’ll want to weigh the benefits and risks so that you can make an informed decision on whether or not a reverse mortgage is right for you.
To be eligible for a reverse mortgage, you must be a homeowner at least 62 years old and have sufficient equity in your home. Consider the following pros and cons:
Pros of a Reverse Mortgage
- Live in your home and make no monthly mortgage payments2
- Receive loan funds in a lump-sum , monthly payments, as a line of credit or in a combination of these options
- Proceeds are tax-free3
- Heirs are not personally liable if payoff balance exceeds home value
- Heirs inherit any remaining equity after paying off the reverse mortgage
Cons of a Reverse Mortgage
- Reverse mortgage loan balance increases over time
- Value of estate inheritance may decrease over time as proceeds are spent
- Fees can be higher than a traditional mortgage
- Initial FHA Mortgage Insurance Premium
- Annual FHA Mortgage Insurance Premium
- Loan origination fee may be higher than traditional mortgages
- Although Social Security and Medicare eligibility are not affected by a reverse mortgage loan, needs-based government programs such as Medicaid may be affected.
Now you know the key elements to consider about reverse mortgages. Share this information with your family and others you may want to discuss it with. A reverse mortgage may be the solution to enhancing your financial security, enabling you to stay in your own home and have the cash flow you need to enjoy your retirement.
If you would like to talk with a licensed adviser to learn more about a reverse mortgage and how it may be able to help address your financial needs, call 1 (800) 976-6211. Or use our reverse loan calculator to determine your eligibility.