Reverse mortgages are increasing in popularity as a way to turn home equity into a liquid asset. Before you jump on a reverse mortgage, you need to understand the impact it can have on government benefits.
The beauty of home ownership is found in the value of time. The longer you own a home, the more valuable it become. On one hand, you are paying off the mortgage over time, which is increasing the equity you have in your property. The other finds your real estate appreciate over time. This double whammy is what makes home ownership so attractive.
Retirement and old age will become an issue when you need to convert your home equity into usable cash. Reverse mortgages are touted as a solution. A reverse mortgage is a loan against your equity that does not need to be repaid until an event happens, usually the sale of the home or your death.. Essentially, you have reversed the process of a traditional mortgage. The lender is now giving you money in exchange for a piece of your home equity. Payments are expedited in lump sums, monthly or through credit lines depending upon the particular package you go with. As the clock ticks, the equity in your home is reduced, but you will have a reliable and predictable monthly revenue source.
Over the years, the fed has tried to find ways to reduce the amount of benefits they pay out to citizens. One of the factors they like to use is the asset value you hold. If you have a certain amount of assets, your benefits are reduced or terminated because they government takes the position you do not need them. An analysis of government benefits is beyond the scope of this article, but reverse mortgages have an impact.
Basically, be assured that taking a reverse mortgage on your home will not affect Medicare or social security benefits. This is true, however, only so long as you spend the full amount you receive each month. The government is always playing with benefit issues, so make sure you get up to date information on the situation. You will want to understand what you are getting into, particularly if you rely heavily on Medicare for the payment of medical bills.
In general, reverse mortgages do not impact most government benefits. That being said, make sure to get an informed opinion on exactly what will happen before you agree to a reverse mortgage.
A reverse mortgage is a special type of loan that home owners can sometimes get to convert the equity in their homes to cash. Basically, a reverse mortgage is a type of loan that provides you with a monthly income, a lump sum of cash, or a line of credit.
This reverse mortgage concept was for retirees keen in keeping their homes but whose incomes aren’t sufficient to support their lifestyle, and is used to help people on low incomes to pay for daily expenses, huge medical bills or the odd house maintenance and repair costs. Reverse mortgage also pays off your existing loan, if you have any.
Reverse mortgages appeal to older adults because of the lump sum loan advances, which are not taxable. It does not generally affect your Social Security or Medicare benefits. Another advantage of reverse mortgages is the different withdrawal options that you can choose from. These options include lump sum pay outs, line of credit, monthly payments, or any combination of these three. So if you were eligible to borrow $250,000 on a reverse mortgage you could select to receive $75,000 up front to cover current expenses, and hold the rest as a line of credit that you can use whenever you need it. This flexibility of reverse mortgages can significantly improve you financial independence during retirement
The disadvantage is the relative cost of a reverse mortgage. Reverse mortgages tend to be very expensive when compared with a traditional mortgage. This is due to the rising-debt nature of the reverse mortgage concept. Another disadvantage is the payments from a reverse mortgage loan can can affect the eligibility for old age pensions, or supplemental Social Security income.
Considering these facts, reverse mortgage are definitely an option to look up to if you are looking for ways to supplement your current income. As with any financial decision, sought advice from trained and licensed financial professional to analyze and determine if a reverse mortgage is right for in your unique circumstances.
Seniors would want to enjoy their golden years but are usually left stranded with decreasing income or the inability to increase their monthly income. One of the better ways to overcome this problem is by obtaining a loan called a reverse mortgage. A reverse mortgage enables homeowners older than sixty two years of age to convert the equity in their homes into tax-free income while they continue to live in that property. Seniors will be paid by the lender according to the current value of the property, in contrast with a traditional mortgage where monthly payments are made to the lender.
How do you know if a reverse mortgage is right for you and that you would not end up sleeping on the streets? Reverse mortgages are indeed an excellent option for many living in their twilight years, but will take careful planning and consideration. Since the pay out terms can be structured in a variety of ways, it is essential to look at the amount you are able to get from your home and your long term financial needs.There are of course no restrictions on the use of funds, meaning you can do anything you like with the proceeds of a reverse mortgage, including home improvements and daily expenses.
Reverse mortgages won’t affect regular Social Security or Medicare benefits. MedicAid eligibility may be affected in some instances. Counseling is a mandatory for those who wish to apply for a reverse mortgage. Look for a counselor from a government sponsored lending agency if you need them to answer all your questions convincingly or those related to benefit reductions.
Reverse mortgages is a very effective method in supplementing your post retirement income but you must be aware of how the pay out structure can positively lessen your worries on the long term financial picture. Make an informed decision. Simply view all the information available before taking up a reverse mortgage. The good news is for those who have paid the majority or their entire home, their post retirement lifestyle need not be hampered by a lack of cash flow.
The following is a short story about an old couple who were abandoned by their children and family to fend for themselves. After having sacrificed for several decades to raise their family, all they had in return were debts and mortgages, which appeared impossible to settle since they could no longer afford to pay them off. They owned nothing except their home, which they cherish for the memories it gave them.
Hope beckoned in the form of Reversed Mortgage and this discovery led them to relocate their dignity and self-confidence to survive for as long as they exist.
Usually, I would blame my ageing cells for the sleeplessness and take a pill to induce sleep. But this night I felt calm and relaxed. Reversed Mortgage has given me hope when everything else failed. My wife of 34 years was sitting next to me, with her head resting against my tired, droopy shoulder. The thought of how the chatter and laughter which was usually heard throughout the day and late into the night has been replaced with the numbing silence, brought a deep sorrow from within me.
When I turned 68 a few months ago, there were no birthday wishes or greeting cards in the mailbox. Neglected by our three children and relatives, we have been fending for ourselves over the past few years. The debts kept piling up and mortgages forced me to seek for employment even after my retirement years ago.
Due to my ailing health, I could not work for long hours and had to quit after a few weeks. We sought financial aid from our children. None of them were willing to part with their money for us. Social security hardly met our requirements. All we had to call our own, was our the place we live in and everything in it.
It was only a couple of weeks ago, my wife and I decided that the only way we could overcome this financial problem is to sell our house. We could not bear to part with it since we have so many memories, which are engraved within its walls and our hearts, but we did not seem to have another option.
Thankfully, we received some timely advice from a close friend when we were in the brink of putting up our house for sale, he suggested that we opt for a Reverse Mortgage. At first, we were pessimistic when the word ‘mortgage’ came up and we refused to listen further but when he insisted that we trust his opinion; we obliged.
What got us excited was that we did not have to sell our house! We could live in it for as long as we wanted and we did not have to repay as long as we stayed there. We could even resell the house whenever we wanted. We are not required to have any credit or income either!
He took us to a Reversed Mortgage counselor who gave us more details. We were told that I would not be under any pressure to make monthly repayments. There were also various options in terms of interest rates and I could use the funds, which I obtain from the Reversed Mortgage for any purpose. I could receive the cash in one lump sum or as monthly payouts or both.
Since I am over 62 years of age and own my home, I was told that I am eligible for a Reverse Mortgage.
Although the initial fear about how my debts would rise, as the equity would fall, the counselor convinced me that the equity would rise with time as the value of the house goes up.
With over 300,000 senior citizens opting for Reversed Mortgage, it seemed suitable and convenient for us too. I could even pay the various loan fees through the mortgage fund.
Well, we did realize that this facility did have its disadvantages. For instance, we will have to make the repayment if we fail to pay our property taxes, the house is not well maintained or if we fail to keep our home insured.
After completing the research we did together and the counseling we attended, we decided to opt for Reversed Mortgage. Having weighed the advantages and those that are against it , we knew that this was by far a much better solution than to sell our home or seek for a loan elsewhere.
I held my wife closely and sighed in relief. She looked up and I saw hope embedded in those gray eyes. Smiling at each other, we knew that we extended ourselves another milestone together. This time, we could leave our worries behind.