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How Reverse Mortgages Help Seniors Remain Independent
When a senior over the age of 62 takes out a reverse mortgage, he or she has several options with regard to how to take the proceeds. The first option for taking funds is to take monthly income. A check from the reverse mortgage can be sent each month or it can be direct deposited into their checking account for convenience. The amount they can take will vary depending on age, the property value and equity. Your reverse mortgage lender can also set up monthly income for a specific time frame. This allows the senior to take more monthly income for a shorter period of time.
The second option for taking funds from a reverse mortgage is to take them as a lump sum. The senior should be very cautious that they put these funds into something safe. There are horror stories about seniors taking out a reverse mortgage and then investing in some kind of annuity which ties up their money and they don't have it when they need it. Remember, even though the lump sum is tax free, any interest earned on that lump sum, could be taxable.
The third option for taking a reverse mortgage is actually the most popular. This is to take the money from the reverse mortgages in the form of a line of credit. The senior can take out funds whenever they need them; say for property taxes, in-home care, home repairs or to supplement your income and the rest of the money stays in the line of credit. The last option is to combine these other options when taking out a reverse mortgage. For example, you can elect to take some of the money upfront and the rest as monthly income.
Every situation is different so there is no right way to take out a reverse mortgage. Taking the equity out of your home to pay for homecare instead of going to an assisted living or nursing home is also a good Medicaid planning tool. Since Medicaid puts a lein you're your home when you sell it this will leave no real equity to be had. This will also help you to remain in your home longer as well. Many more people are going to have to use this option since their investments now aren't going to enable them to live in an assisted living community.
There have been a lot of myths associated with reverse mortgages such as they take the title to your home - you remain in title and there is a lien attached to your home and upon your death the bank takes the reverse mortgage amount out of the proceeds from the sale of your home and the remaining equity goes to your heirs. Another myth about reverse mortgages is that closing costs are high. They are not much different than a typical refinance of a mortgage. There are no income or credit score guidelines to meet either. If it is your goal or your loved one's goal to remain in their home as they age check out a reverse mortgage today. In
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