Reverse mortgage loans for seniors at or over the age of 62 could come with a series of potential advantages, though seniors serious about seeking out a potential loan should do their research to find out how such a product could more specifically affect their financial situation. This is the perspective shared in a column published this week at CBS News’ Money Watch.
“If you’re in this age range, you might consider one of these loans, particularly if you’re looking for extra income or to eliminate monthly housing costs in retirement,” the column reads. “Reverse mortgages, while often beneficial, however, aren’t right for everyone. You’ll want to consider your personal financial situation, goals and other factors to confirm that these loans are a good fit.”
The column goes on to list four potential benefits that a reverse mortgage loan could come with first focusing on the prospect of getting extra cash to use how the borrower sees fit.
“You can put the funds toward everyday living expenses, a trip, paying off debts, investing or achieving any other financial goal you might have,” the column reads. “It can also act as supplemental income — particularly if you choose monthly payments. These can be a great way to offset any loss in earnings you experience when you retire.”
A second potential benefit is that use of a loan’s proceeds could reduce a borrower’s monthly expenses, specifically in relation to an existing mortgage payment, the column says.
“If you still have a balance on your mortgage, you’ll need to use your reverse mortgage funds to pay that off first,” it reads. “While doing so will reduce the total amount of funds you can access, it also comes with a huge perk: You no longer have a monthly payment. This, combined with the extra income you get from your reverse mortgage payments, can make retirement significantly more comfortable.”
The third potential advantage is that a reverse mortgage allows a senior to age in place in their own home, since the terms of a reverse mortgage only suit someone who is determined to remain in their home for the long haul.
“Selling your house or downsizing is one way to access your home equity in retirement, but not everyone is willing — or even able — to move. If you’d prefer to keep your home and age in place, a reverse mortgage can be a smart alternative.”
The cash from the loan’s proceeds can also be used to further bolster the home’s ability to more adequately accommodate needs that could arise as a senior gets older, including home modifications like grab bars, rails or other assistive devices, the column reads.
Finally, the fourth listed advantage relates to not owing any extra taxes.
“Though reverse mortgage payments can often feel like extra income, they aren’t taxed like it,” the column reads. “In fact, the IRS actually says reverse mortgage funds are loan proceeds, so you won’t owe taxes on any payments you receive. This is just another way they can help you keep expenses low in retirement.”
The column ends by encouraging seniors considering a reverse mortgage to find out all of the particulars and how it could affect their financial standing before moving forward.
“There are downsides to reverse mortgages, too,” the column reads. “For one, they put your home at risk. If you’re unable to stay up to date on your property taxes and home insurance, the lender could foreclose on your house.”