Is a reverse mortgage worth it?

If you’re a senior looking to cut costs or earn extra income, you may be familiar with a product Reverse mortgage. Reverse mortgages are a funding source only for homeowners who are 62 or older. Like other home equity options, ie Home equity loan And Home Equity Lines of Credit (HELOCs)Reverse mortgages you can tap into Equity in your home. However, they offer something unique convenience.

You can get reverse mortgage funding as a lump sum, line of credit or monthly payments. These funds are tax-free, and you don’t have to pay the lender back as long as you live in the home, making it the rare loan that pays you back instead of the other way around.

Sound intriguing? If so, read on to find out when a reverse mortgage is worth considering.

If you think you’d benefit from a reverse mortgage, see what you might qualify for here.

Is a reverse mortgage worth it?

As with any financial product, reverse mortgages also come in handy Advantages – Disadvantages. Here are three of their major advantages.

It can provide cash flow

You can use a reverse mortgage for anything you like – there are no restrictions. If you choose a lump sum payment or line of credit, you’ll have one A large amount of cash For one-off expenses such as paying off debt or making your home more accessible. If you choose monthly payments, your daily living expenses or Very long service.

Compare your reverse mortgage options online now.

This can reduce your monthly mortgage payment

With most loans, you must begin repaying the lender after you receive the funds. That is not the case with reverse mortgages.

If you owe a balance on your mortgage, you must use reverse mortgage funds to pay off that balance. This will result in you getting less in cash. However, this means you will no longer have monthly mortgage payments. This distinguishes it from home equity loans and HELOCs, which Payment is required Either immediately or within a specified number of years.

If you sell the home, move, or die, your reverse mortgage comes due — at which point, your heirs must pay it back, either out of pocket or with the proceeds of the sale of the home.

Note: You must continue to pay property taxes and home insurance. If you fail to do so, the lender can foreclose on your home.

It is tax free

The The IRS Reverse mortgages don’t consider fund income, although you can use them as income. Instead, it treats them as loan money, so you don’t pay any taxes on them as long as you still own and live in the home.

If you sell the home, you may be able to deduct the interest while paying off the loan. To do this, you must use the funds for a IRS-approved reasons — Namely, “Purchasing, constructing or substantially improving the home that secures the loan.”

Check your reverse mortgage eligibility here.

Bottom line

Time to make a decision Whether to take out a reverse mortgage, it is important to weigh the pros and cons For example, while it may give you much-needed cash, you risk losing your home if you can’t keep up with property taxes and home insurance payments. Do your homework, compare your options, and contact a mortgage expert if you need additional guidance.