Investopedia: 6 Steps To Retiring With A Reverse Mortgage

Many people haven’t saved enough to cover retirement expenses, but many have one major asset: a home. And for older homeowners looking for a source of long-term income to pay for these expenses, a reverse mortgage might be a good option, according to Investopedia.

The online resource for investment, finance and market analysis suggests six steps to retiring with a reverse mortgage.

Before looking into the loan, which converts home equity into cash, homeowners must first make sure they’re eligible.


Additionally, if you have or are planning to apply for Medicaid or Supplemental Security Income, note that any funds you retain count as an asset, which could make you ineligible for these benefits.

“It is generally recommended that you use any reverse mortgage proceeds immediately to avoid any potential problems,” Investopedia writes.

Next, compare loan types and shop around. Home equity conversion mortgages (HECMs), the most common type of reverse mortgage, are issued by private banks and insured by the Federal Housing Administration (FHA).

Non-HECM loans are also available from various lending institutions, but are not federally backed and can be considerably more expensive than HECMs.

Shop around and compare the terms presented by various lenders, Investopedia suggests.

“Keep in mind that you don’t have to purchase any other products or services to get a reverse mortgage (with the exception of property insurance). Be wary of anyone who tries to pressure you into buying other financial products, such as annuities or long-term care insurance.”

Finally, choose a payment option for the loan and review the loan’s terms before signing. Reverse mortgages can be taken out as a lump sum, monthly payment, a line of credit or a combination of these options.

“You need to make sure you fully understand the terms and are confident about the lender,” Investopedia writes.

To read the full article, click here.

Written by Emily Study

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  • There it is, a loan of last resort.

    Like so many, the Investopedia authors cannot distinguish cash inflow from income. Because of their ignorance they do not see the product for what it is, a mortgage with unusual cash inflow benefits and opportunities for borrowers to improve their retirement years and through prudent pay down of debt have a ready and generally adequate cash reserve throughout retirement whenever needed, especially when it comes to the mass affluent over 62 years old.

    A HECM (or any reverse mortgage) can be used as a loan of last resort but that is one of the least effective ways to use the proceeds. But one thing a HECM or any reverse mortgage for that matter do NOT produce is income for the borrower. ANYONE who promotes that concept should not be selling a HECM because all they are promoting is misunderstanding and future disappointment in a truly great mortgage for most borrowers.

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