Does a Reverse Mortgage Make Sense? 3 Things to Know

Raise your hand if you’re one of the two or three people in the U.S. who’s not scared of running out of money in old age.

Exactly. Since we can’t know how long we’ll live or how much we’ll need in retirement, only the very rich can be sure they’ll have enough.

For the rest of us, a little additional planning could make a huge difference when retirement time rolls around.

For example, a reverse mortgage could make the difference between living well or just scraping by.

A nice surprise

If you own a home, you might already have exactly what you need for a comfortable life in retirement. And you won’t have to sell your home to make it happen.

With a reverse mortgage, you can borrow against your equity and stay in your home as long as you want, provided you keep up the property and pay the taxes and insurance.

Here are three important things to know.

1. You keep your title

It’s important to know it’s still your home.

A home equity conversion mortgage (HECM, the type insured by the federal government) works pretty much like it sounds. Instead of borrowing to buy a home, you borrow based on the equity built up in your home.

You don’t make payments; instead, the lender pays you.

Regardless of how big your loan balance becomes, you or your heirs won’t ever owe more than the home is worth. (It is a “non-recourse” loan, meaning that, if you owe more than the home’s value, the Federal Housing Administration makes up the difference.)

Your lender will charge fees and interest, and it will get their money when the last borrower dies or leaves. The money is tax-free, because it’s a loan and thus not taxable income.

Meanwhile, you keep the title to the home. When you leave, if the home is worth more than the outstanding loan balance, you or your heirs will get the difference.

2. You need to shop smartly

The government stepped in a few years ago and improved reverse mortgages, making them safer.

Rules now require you to get one-on-one counseling with an approved reverse mortgage educator. You’ll also have a financial assessment, to ensure that you can hold up your end of the loan agreement. You’ll have three days to change your mind after signing the loan. The federal Consumer Financial Protection Bureau has information about reverse mortgages, too.

Despite these protections, scammers sometimes pretend to be legitimate lenders. Stay safe by working with well-established and trusted lenders.

One good company for free information and a quote is Longbridge Financial. You can get a free, no obligation quote in seconds. They’re A+ rated by the Better Business Bureau, a lender top-rated by Consumer Advocate and have a 5-star rating with Trustpilot.

You’ve no doubt wondered if a reverse mortgage could add to your retirement income. Why not take a few seconds and get a free Longbridge estimate and more info?

3. Many people qualify

Not sure if you meet the requirements for a reverse mortgage? Here are a few specifics:

• You or your spouse must be at least 62.
• You’ll need a fair amount of home equity. But don’t assume you aren’t eligible. Ask Longbridge Financial or another lender, and they’ll let you know if you qualify.
• You can stay in the home until either you or your spouse die or move out. You can typically withdraw the loan in a lump sum, monthly payments, a line of credit or some combination of those options.
• The downside: When you leave the home, your equity may be depleted, leaving little or nothing for you or your heirs.

Bottom line? A reverse mortgage isn’t for everyone, but get a free quote and more information. That way you’ll be in a position to judge for yourself. And since you can get free information and a quote in seconds, and it could make a huge difference in your quality of life, every homeowner 62 or over should at least check it out.