Some people would have you believe that reverse mortgages should only be considered as a last resort… when you need money and have no other choice. Not only do I think that’s wrong… I also think that for today’s retirees, it’s particularly bad advice.
Some people would tell you that reverse mortgages are somehow “risky,” and I think that’s nonsense as well. In fact, I would have to say that today’s reverse mortgage, regulated by the U.S. Department of Housing and Urban Development (“HUD”), is if anything, less “risky” than any other types of mortgage you could have.
Maybe the wealthiest retirees can get by without taking out a reverse mortgage as a way to protect their financial futures, but for the rest of us… not having funds from a reverse mortgage available is what’s risky. And I’d even go one step further and say that you shouldn’t wait until you need the funds that would be available from a reverse mortgage to apply for one.
That’s right… I think it’s prudent for retirees to get their reverse mortgages in place now… well before they need the money.
Why? Well, first of all, let’s get a few things straight about reverse mortgages.
A reverse mortgage is not some risky exotic type of loan that causes people to lose their homes or the equity in their homes. In fact, a reverse mortgage is just like any other type of mortgage… you borrow some amount of money and you pay it back with interest.
The only difference with a reverse mortgage is that you don’t have to pay the money you borrow back if you don’t want to… it can be paid back after you or your spouse dies from the sale or refinance of your home by your heirs.
Secondly, reverse mortgages are “non-recourse” loans insured by the FHA, so no matter what happens to the value of your home in the future, you or your heirs can never owe more than the home is worth. And with a reverse mortgage, you still always own your home and your heirs inherit whatever equity remains after repaying whatever is owed on the reverse mortgage.
Third, and this is a very important point, a reverse mortgage is incredibly flexible… you can use it the way you want to… pay it back the way you want to… or you can leave it open like …read more