A reverse mortgage is a tool that helps retired seniors to borrow money against the value of the home. Another reference to reverse mortgage is home equity conversion mortgage (HECM). The general design of home equity conversion mortgage is to help retired seniors have a more comfortable living in their retirement by covering most of the major expenses like healthcare costs. This article looks at some of the advantages of considering reverse mortgage.
Retired seniors can have a safer mortgage by choosing home equity mortgage loans. Initially, there were a few contentious issues about reverse mortgages but they were resolved and some of the deliberative changes makes reverse mortgages to be safer for retirees.
Some of the new rules particularly take care of surviving spouses as opposed to the older versions of the mortgage. If a spouse is not included in the loan, then they run a risk of losing the home when the borrower of the reverse mortgage loan passed away. New rules of come into play to help surviving spouses to secure homes even if they’re not included as part of the primary borrower.
Owing to the fact that there are financial assessments in the acquiring of HECM loans, there is a great reduction of risks. Even with home equity conversion mortgages, there are some housing related expenses that the borrower is expected to take care of themselves but even so, the financial assessment by the lender can be able to give them insight as to whether the retired senior can be able to take care of such expenses as property tax, homeowners insurance, HOA duties and the maintenance expenses, of which they can be able to step in if they do not have the ability to fulfil such financial obligations which in itself makes reverse mortgages to be safer.
Another benefit of home equity conversion mortgage is that you’re able to secure housing at a lower cost or no cost at all. It is proven by research that retired seniors account for it a third of the total monthly income going to housing expenses which therefore means that reduction in the costs or eliminating the costs completely is a huge money saver for retirees.
Another benefit of reverse mortgages is that the proceeds of the loan are not taxable income. Regardless of whether the retired senior require a monthly distribution or a lump-sum payment to be able to cover most of the expenses, all of that will not be subject to taxable income.
We can therefore put it out that there is no better option when it comes to housing retired seniors delegating the finances from reverse mortgages.