Reverse mortgages: An overlooked retirement planning tool

If ever you privation to wide retired a room, commencement a speech astir reverse mortgages. You'll person the hors d'oeuvres and past immoderate to yourself.

But folks shouldn't shy distant from talking astir a instrumentality that, successful the close circumstances, could beryllium utilized to amended their fiscal information successful retirement.

So said Don Graves, laminitis of the Housing Wealth Institute, successful a caller Decoding Retirement podcast (see video supra oregon perceive below). "It's not spooky," helium said. “It's not dangerous. ... It's conscionable a mortgage."

According to Graves, a reverse mortgage, and specifically the Home Equity Conversion Mortgage (HECM), is simply a federally insured indebtedness for retirees ages 62 and up that allows them to person a information of their home's worth into tax-free dollars without giving up ownership oregon making monthly owe payments.

"It's conscionable a location equity indebtedness for those aged 62 oregon older that gives them entree to dollars without the load of making a mandatory monthly main and involvement payment," helium said.

Read more: What are the pros and cons of a reverse mortgage?

Reverse mortgages person a agelong history. Originating successful 1961, they gained US national authorities backing successful 1988 done the HECM program. Internationally, these fiscal products are marketed nether much approachable terminology. In the United Kingdom, they're commonly known arsenic "lifetime mortgages" oregon "equity release" products, presumption that much transparently picture their relation of converting location equity into accessible funds during status portion allowing homeowners to stay successful their residences.

According to Graves, astir 98% of reverse mortgages successful the US are HECMs, which are insured by the Federal Housing Administration nether the US Department of Housing and Urban Development.

And these federally backed loans supply important user protections and standardized presumption that person helped found reverse mortgages arsenic a morganatic fiscal readying instrumentality for qualifying homeowners.

To beryllium sure, reverse mortgages aren't for everyone.

Graves said that of the 16,000 radical he's talked to implicit the past 26 years successful the business, lone 3,000 reverse mortgages went forward. The assets whitethorn not marque consciousness for those who don't program to unrecorded successful their location long-term, don't person a strategy oregon request for the funds, and don't request further income sources.