Reverse mortgages are becoming a more mainstream retirement planning tool, and some even liken the loan to a pension, giving borrowers a tax-free monthly payout or a lump sum, Registered Investment Advisor Terry Savage writes in a recent Chicago Tribune article.
Borrowers can tap into their home equity even if they still have a small balance on their mortgage, and use the cash for any purpose — living expenses, medical expenses or even a vacation.
“It’s not too good to be true. It’s called a reverse mortgage, and it’s your reward for faithfully paying down your mortgage over the years,” Savage writes.
When considering taking out the loan, borrowers should ask five questions: How much can I borrow? What’s the interest rate? What fees and costs are there? What other costs will I have? What happens when I die, sell or move?
Learning the answers to these questions can help prospective borrowers make a more informed decision. But when it comes to Savage’s opinion, reverse mortgages work — and she’s seen the results.
“Do I believe in reverse mortgages? Actions speak louder than words. Nearly 20 years ago, I helped my father take out a reverse mortgage,” she writes. “Over the years, the outstanding mortgage balance, including interest, has grown to far more than his Florida condo is worth. Now, at age 93, he still enjoys living there. His reverse mortgage worked.”
To read the full Chicago Tribune article, click here.
Written by Emily Study