So what is a reverse mortgage?

A reverse mortgage is a financial tool offered by the U.S. Department of Housing and Urban Development ( HUD). The reverse mortgage is for seniors that are 62 years old and older. The reverse mortgage allows seniors to borrow a large part of their equity in cash and never make a payment on the loan. Many seniors have used the reverse mortgage to make their existing home more “ user friendly” by adding ramps, grab bars, stair climbers, accessible showers, and the list goes on and on. The cash could also be used in the form of an annuity to supplement your monthly income without depleting your retirement savings.

        Another option is to use the reverse mortgage to purchase a home that is more suitable to the lifestyle that you would like to live as an active senior but didn’t think you would be able to afford it. For instance, let’s suppose you live in a $ 250,000 home that is paid for but the neighborhood no longer suits your lifestyle (Big wheel racing down the sidewalk at 7am).  You find a home in an age restricted active senior neighborhood for $ 400,000.  In this example, you would sell your existing home, put $140,000 down on the new home ( this varies depending on your age ), obtain a $ 260,000 reverse mortgage and never make a monthly payment. Of course you will still have to pay property taxes, hazard insurance premiums and the monthly homeowner’s association fees, if applicable. There will never be a payment on the reverse mortgage. You may even use a reverse mortgage to purchase a multi-family income property with up to 4 units as long as the qualified borrowers live in one of the units. You could then use the income from the other units to supplement your monthly income.

     A real life example of the power of the reverse mortgage is a couple in their 70’s that have a large 2 story home worth $ 300,000. Their equity after paying selling expenses is $ 180,000. They purchase a ranch style patio home with no stairs or yard work for $350,000. They  put $133,000 down, obtain a $217,000 reverse mortgage and say goodbye to stairs, yard work and monthly mortgage payments.

     The reverse mortgage may or may not be right for your situation but it just another option for you to consider. The best way to see if this may be right for you is to speak with a Real Estate professional that understands the needs of mature clients.