Using reverse mortgage, any sixty two years old or over can convert the home equity into cash. The mortgage lenders give the cash by lump sum payment, several payments, credit line, or combination. Here are the common advantages of reverse mortgage.
Maintain the title and ownership
The borrower keeps the title and ownership of the home. The borrower is still the owner of the home. It is still the responsibility of the borrower to pay for the insurance, maintenance, repairs, and property tax.
Continue to live in the home
The borrower can live in the home as long as the borrower likes. In case the borrower decides to sell or move, the capital gain pays off the reverse mortgage first. The rest of capital gain is for the borrower to keep.
No Mortgage Monthly Payments
In a traditional mortgage, the borrower makes monthly mortgage payments. Unlike the traditional mortgage, the borrower defers the mortgage payment in reverse mortgage. The borrower skips the mortgage payment until the borrower dies, sells, or moves. So, the reverse mortgage is easier to get. The borrower does not need to qualify for monthly mortgage payment.
The amount from reverse mortgage is tax-free. Reverse mortgage may provide extra cash, but reverse mortgage is not really an income. The reverse mortgage is a loan in advance. The borrower will repay the loan after the borrower past away, moves permanently, or sells the home.
The mortgage lenders can only ask for repayment as much as the value of the home. If the reverse mortgage exceeds the value of the home, the mortgage lenders can only seek from the proceeds of selling the home. The borrowers get to keep the other assets like cars, boats, investments, and insurance.
Freedom to use the extra money
The amount from reverse mortgage can be used for any expense. The borrower can use the money for home repair, home improvements, travel, and medical. However, the reverse mortgage from some government agency and non-profit organization are for single purpose only. For example, the borrower can only spend to repair the home. If you want freedom and flexibility, your best bet is Federally Insured Reverse Mortgage and Proprietary Reverse Mortgage.