The Reverse Mortgage… A Wonderful Retirement Planning Tool

In the recent past, our communities’ seniors were perceived by much of society as a non-entity. For many of them, a deep concern became the looming threat of losing their homes due to escalating costs – medical expenses, prescription medications, assisted care, and the general cost of living.

We are proud that the real estate industry and its associates in the financial sector have come up with a significant and innovative product for seniors – the reverse mortgage. By now, many are already capitalizing on it. For those interested but lacking information, here’s the concept in a nutshell.

A reverse mortgage is a special type of loan that enables people 62 or older to convert some of their home’s equity into tax-free cash. However, a reverse mortgage is technically not a loan. It is a credit line that grows, and there is a specific formula for determining its flexible parameters.

Highlights of the loan are as follows: there is NO qualifying – no credit, income or assets required; loan is solely based on equity in home and amount needed to pay off current loans, if any; customers always retain ownership and live in their home; the loan is repaid only when the property is no longer considered the customer’s principal residence; cash advances can be used for any purpose; loan proceeds are not considered income and therefore do not effect Social Security, Medicare or Medicaid benefits; customers optimize cash flow without losing their homes.

Here’s one example that may shed some light. Betty is a 73-year-old widow with a mortgage. Her monthly social security and pension income equal $2,200. She owes $140,000 on her home and has a mortgage payment of $1,450. With over $20,000 in credit card debt, her monthly payment is $450.00. Remaining income? $300.00. A reverse mortgage is awarded for $187,000. $172,000 eliminates ALL of her monthly debts, including her mortgage, and leaves her with a credit line of $15,000.

The reverse mortgage is a wonderful product, and incorporating one into your retirement plan is a prudent idea. But there are a lot of very intricate do’s and don’ts. Be sure to consult your real estate professional to work with you and a reverse mortgage specialist. Make certain everything is handled correctly, then relax and enjoy the many senior years ahead!

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