Reverse Mortgages and Retirement: How Your Home Can Help You As You Age

For many people, retirement is something they look forward to. For others, they fear it due to a lack of financial planning. However, even if you don't have a fat pension or a great investment plan, you can still retire comfortably during your later years if you are a homeowner. 

This can be done via a reverse mortgage that transforms the equity you have built up in your home into retirement income. Below are some of the benefits of using a reverse mortgage for retirement.

It Can Give You Cash

One of the biggest problems for retired seniors is not having enough monthly income. A reverse mortgage can help with this problem in two ways. If you are still making mortgage payments, it can eliminate that monthly expense after you refinance. 

 Then, any equity left can be used to produce a steady stream of retirement income. This can be a great help if you need more than Social Security and whatever retirement plans you have to make ends meet.

It Allows You to Stay in Your Home

One reason why some people are fearful of reverse mortgages is that they believe that they will be forced out of their homes. This is not true at all. The homeowner actually retains ownership of the home until they and their spouse pass away. 

Only then will it be transferred to the lender. The reverse mortgage can also end if you choose to move at some point. Still, it is an excellent option for those that want to continue living in their home permanently.

Your Heirs Won't Have to Pay for It

Another fear people have is that their children or other heirs will have to pay the bill if the amount of equity used exceeds the actual value of the house. This is also false. A reverse mortgage is a kind of financing known as non-recourse. 



What this means is the lender will have no ability to make a claim against an heir to pay for that debt. The responsibility for paying that debt isn't allowed to exceed the value of the home.

The Income Isn't Taxable

Another huge benefit you should be aware of is the fact that the income you receive from your reverse mortgage isn't taxable. This is due to the fact that the IRS categorizes the payments you receive as "loan proceeds." This is a significant advantage over other kinds of retirement income that can indeed be taxed by the federal government.

There are many benefits to having a reverse mortgage during retirement. However, taking out one may not be best for everyone. Consider the benefits, your plans, and your financial situation when making your decision. Get some advice on the matter. It may turn out that a reverse mortgage is right for you and your family.

Are You Thinking About A Reverse Mortgage? You May Want To Think Twice!

We all have felt the hit of the recent financial recession and are trying to recover now. Unfortunately however, many were at the ripe age of retirement or just before as the recession really took hold. This lead to many of our elderly community being overwhelmed with incredible amounts of debt! 

Debt that, can really seem impossible to pay off once you reach a retirement age. Some decided to work for as long as they could to try and recoup losses while others simply retired and planned to cross the bridges as they came. As bridges start to show themselves, a reverse mortgage starts to seem like a great vehicle for crossing a bridge of financial struggles. 

What Is A Reverse Mortgage

A reverse mortgage is just like a standard mortgage. So, to understand the reverse, you must understand the regular. In a regular mortgage, you make payments. As you make payments, you increase the equity in your home. Once all payments are made in full, the home becomes your property. During the course of a reverse mortgage, you don't make payments, the lender makes them to you. 

The payments can be made monthly or in one lump sum and are based off of the equity you've earned making your mortgage payments. However, if you would like to make a payment to increase your credit line, you are more than welcome to do so without penalty. So, this really seems like the revolving credit line of your dreams. No mortgage payment, lenders pay you, you can really pay down some debts! 

So, Why Would You Want To Think Twice

While you still live in your home, the reverse mortgage seems like the greatest thing in the world. But, I'm sure that you have family. Family that you intend on leaving something behind for. Chances are, your children were raised in the house that you are thinking about a reverse mortgage for. You just might want to leave that to them. However, when you pass or leave the home, the debt will become due. 

This means that if your children or other family that you give your home to wants to keep it, they will have to pay for the equity that was removed through the reverse mortgage. The truth is, if a home was left to me under these conditions, chances are, I couldn't go off on a whim and come up with $30,000.00, $50,000.00 or $100,000.00! Therefore, if you plan to give your home to your children when you pass, you may want to think twice about this option! 

Remember, Reverse Mortgages Aren't Your Only Option

Debt can be incredibly overwhelming, even scary in some cases. I know, I've experienced it! But, there is no reason to jump at your first option for debt relief. Who knows, a reverse mortgage might just be right for you. But, always remember that if you decide it's not, there are always other options. I have seen credit card hardship programs, payment plans and balance transfer credit cards really help people in bad financial positions. Before choosing any debt relief option, do a bit of research and make sure that it is the option that best fits your unique financial position.

About The Author – Joshua Rodriguez
This article was written by Joshua Rodriguez, proud owner of CNA Finance and avid personal finance journalist. Join the conversation about this article on facebook!