Reverse mortgages can help seniors manage their assets responsibly, in the right situations.
Reverse mortgage loans are often misunderstood — but, in the right circumstances, they can be an ideal way for seniors (ages 62+) to create a stable financial future.
Retired seniors (or those entering retirement soon) with a mortgage could tap into their home’s equity now — preserving their assets for future expenses such as medical bills or travel. Or, they could use a reverse mortgage to purchase a new home.
How Traditional Mortgages and Reverse Mortgages are the Same
For both traditional and reverse mortgages:
- The homeowner’s name is listed on the title/deed
- The home is used as collateral
- The home value appreciates
How Traditional Mortgages and Reverse Mortgages are Different
- A monthly payment is required for traditional mortgages, but not for reverse mortgages
- A traditional mortgage is a recourse loan (meaning the lender can seek shortfall from the homeowner and/or their heirs) while a reverse mortgage is a non-recourse loan (meaning the lender cannot seek shortfall from the homeowner and/or heirs)
- A homeowner with a traditional loan pays interest immediately, while a homeowner with a reverse loan pays interest later
- A homeowner with a traditional mortgage cannot access their equity unless they refinance the loan or sell the home, while a homeowner with a reverse mortgage can access their home’s equity now or in the future (through a line of credit)
- A homeowner with a traditional loan risks foreclosure if they don’t make their monthly principal and interest payments, but a homeowner with a reverse loan doesn’t (as long as they keep up with their tax, insurance, and/or HOA payments)
Reverse Mortgage Benefits
Reverse mortgages can give homeowners more control and more options, in comparison to a traditional mortgage. With a traditional (conventional) loan, a homeowner must make a monthly payment to cover the interest and principal reduction.
With a reverse mortgage, the homeowner doesn’t have to make a monthly principal and interest payment, but they can if they want to.
Why would they want to? It could benefit them in these ways…
- If a homeowner does decide to make a monthly payment, 100% of the payment amount will cover mortgage insurance and interest first AND 100% of the payment amount will be added to the line of credit. This means if they need the money back in the future, they can simply request it and have it put back in their bank account.
- Also, assuming they have a line of credit — if they need more monthly income in the future, they can call the lender and request the remaining line of credit be annuitized. Then, a monthly payment will be sent to their checking account.
- Finally, if they have a balance in the line of credit, the homeowner could also contact their lender ask for that full balance to be put into their bank account.
For many seniors, the flexibility of a reverse mortgage is appealing because they will have options, should they need additional monthly income or a lump sum of cash in the future.
At Waterstone Mortgage, we help seniors explore whether a reverse mortgage is ideal for their current circumstances and long-term goals. Because reverse mortgages are unique, we take the time to answer questions, address concerns, and help our potential clients strategize for the future.
Interested in learning more? Get in touch with a trusted Reverse Mortgage Specialist at Waterstone Mortgage to see if you might qualify for a reverse mortgage. It’s our goal to help senior citizens create a more financially stable and secure retirement.
Property and borrower eligibility requirements apply. Loan becomes due and payable when the last remaining borrower (or eligible spouse) sells the property, permanently leaves the home or passes away. Taxes, insurance, and repairs are the responsibility of the borrower and must be maintained to avoid early repayment of the entire loan amount. Consult a tax advisor for questions about tax and government benefit implications.