The Many Benefits of Reverse Mortgages

By February 20, 2017 reverse mortgage No Comments
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It’s common and understandable to think of a mortgage only in terms of a long-term expense, but for people of a certain age or beyond, this isn’t always the case. Most people spend a great portion of their adult lives paying a mortgage, but there’s a certain point at which the opposite becomes possible – a mortgage can actually pay you.

These are called reverse mortgages, and they’re one of our favorite programs at American Loans. Instead of you paying your home mortgage each month, you actually receive money from your lender which can be used for other vital needs.

How does this work, exactly?

How Does a Reverse Mortgage Work?

Reverse mortgages are designed for people over 62, though new laws state that only one applicant needs to have reached this age for reverse mortgages to be approved. The lender takes on monthly payments each month instead of the borrower, and the loan is paid back later – either once the borrower passes away or moves out of the home.

This doesn’t remove all expenses for the borrower, who still has to pay insurance and any taxes or home maintenance fees, but it reverses the largest fees. Instead of paying money every month, borrowers are actually sent money by the mortgage company. At American Loans, we’re happy to use either monthly payments or one single lump sum, whichever works better for your needs.

How Can You Benefit?

There are benefits large and small to a reverse mortgage for those who qualify:

  • No more mortgage payment: With no monthly payment, you can focus on paying down other debt or even settling your outstanding current mortgage debt even as you still live in your home.
  • More cash: No mortgage payments plus extra cash flow means more financial flexibility.
  • Social Security: The extra cash that comes in from a reverse mortgage allows many people to hold off on taking Social Security or 401(k) benefits for a few extra years, which can have exponential financial and tax benefits.
  • Financial counseling: People taking on a reverse mortgage are required to see an independent financial counselor to make sure they’re in a comfortable situation they can handle. This can have several tangential benefits as well, even beyond the reverse mortgage itself.

Drawbacks

It’s important to remember that you’ll deal with high fees and high mortgage rates in reverse mortgages, and that if you ever move out of your home, you’ll be required to repay the loan. There’s also a much lower chance that your home will pass to other family members if you take on a significant long term reverse mortgage – often, the proceeds from the house’s value will be used to pay off the loan balance. These risks are worth it for many people, but make sure you discuss it thoroughly with family, your lender and your independent counselor before making any final decisions.

Details of reverse mortgages have changed in recent years, and the experts at American Loans are ahead of the curve in capitalizing on them. Our brokers are awaiting your call today.

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