In these tough economic times, many retirees are looking for ways to guarantee income in their later years, and getting a reverse mortgage is one possibility, says a recent CNBC article.
As the name implies, such loans work in the reverse order from a typical mortgage, in that you receive a monthly check from your lender based on the amount of equity you own.
There are generally no income restrictions for eligibility, and according to the Federal Trade Commission, the proceeds from your home are tax-free and do not affect your Social Security or Medicare benefits.
Better still, you do not have to repay the loan as long as you live in your home, though it must be repaid when the last surviving borrower dies, sells the home or no longer uses it as a primary residence,” reads the CNBC article.
The loans aren’t for everyone, though, the article quotes a financial expert as saying. Instead, they can be a good option for homeowners who are “cash poor and house rich,” but not necessarily for those looking to tap into their equity for nonessential expenses.
Upfront costs of taking out a home equity conversion mortgage (HECM) are also mentioned, with the financial expert recommending prospective borrowers to “shop around” for lenders offering the best deals as far as origination fees.
Reverse mortgages are named alongside annuities, dividend stocks, and Treasury-inflation protected securities (TIPs) as options for “converting a nest egg into a predictable source of income.”
Read the original CNBC article here.
Written by Alyssa Gerace