Assuming this cost is unaffordable, families try to muddle along without such care or provide the care themselves, often while juggling work and caregiving. Increasingly families are turning to the alternative of using the accumulated equity in their parent's homes, especially when the mortgage has been paid off or is very low.
The basics of Reverse Mortgages can seem so foreign to people that it has actually taken many financial advisors and personal finance gurus some time to understand the product. Many experts shunned the product early on thinking that it was a bad deal for seniors – but as they have learned about the details of Reverse Mortgages, experts are now embracing it as a valuable financial planning tool.
For many people, a Reverse Home Mortgage is a good way to increase their financial profile in retirement - positively affecting their quality of life. And while there are numerous benefits to the product, there are also some drawbacks.
The main advantage of Reverse Mortgages is that you can eliminate your traditional mortgage payments and/or access your home equity while still owning and living in your home. Given the right set of circumstances, a Reverse Mortgage can be an ideal way to increase your spending power and financial security in retirement.
Key advantages and benefits of Reverse Mortgages include:
Stay in Your Home and Improve Your Immediate Finances: – you can also get access to money to use for any purpose.
Flexibility: Households with adequate resources might consider the product as a financial planning tool.
Low Risk of Default: Unlike a home equity loan, with a Reverse Home Mortgage your home can not be taken from you for reasons of non-payment – there are no payments on the loan until you permanently leave the home.
The Reverse Mortgage Lenders have no claim on your income or other assets.
No Downside: With a Reverse Mortgage you will never owe more than your home's value at the time the loan is repaid, even if the Reverse Mortgage lenders have paid you more money than the value of the home.
Tax Free: As a Reverse Mortgage is a loan, the money from it is typically tax-free, whether you receive it as fixed income or in a lump sum.
No Restrictions: How you use the funds from a Reverse Mortgage is up to you
Flexible Payment Options: Depending on the type of loan you choose, you can receive the Reverse Mortgage loan money in the form of a lump sum, annuity, credit line or some combination of the above.
Home Ownership: With a Reverse Mortgage, you retain home ownership and the ability to live in your home.
Guaranteed Place to Live: You can live in your home for as long as you want when you secure a Reverse Mortgage.
Federally Insured: The Home Equity Conversion Mortgages (HECM) is the most widely available Reverse Mortgage. It is managed by the Department of Housing and Urban Affairs and is federally insured. This is important since even if your Reverse Mortgage lender defaults, you'll still receive your payments.