Question: What do these actors have in common? Tom Selleck, Henry Winkler, Fred Thompson, Robert Wagner and the lesser known Jerry Orbach. All of them have been celebrity spokesmen for reverse mortgage. So maybe you’ve heard about this type of mortgage. Because we’re not getting any younger and most of us have a loved one who is older, a refresher to remember more about reverse mortgages would not hurt.
A Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage is a loan available to homeowners, 62 years or older, that allows them to convert part of the equity in their homes into cash.
Why consider a reverse mortgage?
- Want to stay put and “age in place” (the popular term nowadays).
- Expenses, such as health costs and home maintenance, have increased while income has decreased.
- Looking to downsize and want to take advantage of the hot market.
- Want to access the equity in their home to supplement their income or have money available for a rainy day.
- Eliminate their existing mortgage and improve their monthly cash flow.
In a reverse mortgage, the lender pays the borrower – the opposite of the normal “forward” mortgage. The borrower is not required to pay back the loan until the home is sold or vacated. Qualification is based solely on age and equity. Because it is borrowed money, the owner does not pay taxes on it.
You can also buy a home using a reverse mortgage. A great option when downsizing from an existing home. The advantage of using HECM for Purchase is that the new home is purchased outright, using funds from the sale of the old home, private savings, gift money and other sources of income, which are then combined with the reverse mortgage proceeds. This home buying process leaves no monthly mortgage payments.
There is a lot information and considerations when thinking about reverse mortgages. It is also not for everyone. There is way too much to review in a small post so here are some links you may want to visit to learn more.
- Pros and Cons, Benefits, Pitfalls and Disadvantages of Reverse Mortgages
- 25 Ways to use a reverse mortgage
- Colorado Housing Connects
- Traditional Reverse Mortgage vs. HECM for Purchase
Looking to buy or sell your home OR business? You can contact me by email or call 720-253-8513.