Wondering if a reverse mortgage is right for your retirement plan to supplement your income? A reverse mortgage allows homeowners age 55+ to convert part of the equity in their home into cash, without having to sell the property or make monthly mortgage payments. Instead of you paying the lender, the lender pays you.
Pros: How a reverse mortgage can help
- No monthly mortgage payments: This is often the most attractive feature. By eliminating monthly payments, retirees can free up cash flow.
- Support for assisted living or medical needs: The extra income may be essential for those needing in-home care or transitioning to assisted living.
- Retirement made more comfortable: With more accessible funds, you can plan for leisure, travel, or home improvements.
- Supplement to fixed income: It’s a solid way to boost income from pensions or Social Security, especially with rising living costs.
- FHA insured: Home Equity Conversion Mortgages (HECMs) reverse mortgages have non-recourse protection. This means the borrower is not liable to pay more than the value of the home if the loan balance exceeds the home's sale price.
Cons: What to keep in mind
- Reduced inheritance: Because the loan is repaid when the home is sold or the homeowner passes away, there will be less equity to leave to heirs.
- Ongoing obligations: You’ll still need to maintain the home and keep up with property taxes, fees, and insurance. If these aren’t met, the loan may become due and payable.
- Staying in the home comes with conditions: Your right to live in the home depends on continuing to meet the loan terms.
A reverse mortgage can be a lifeline, or a liability, depending on your circumstances. It’s important to fully understand the responsibilities and long-term impact before moving forward. Consulting with a trusted financial advisor or housing counselor can help you decide if it’s the right move for your retirement plan.
Arizona Financial is here to help with home equity options for your needs. Contact a Reverse Mortgage Specialist for assistance.
This information is not from HUD or a government agency. You are required to maintain the home, pay property tax, HOA fees, and homeowners insurance. Consult your professional tax advisor.