Getting a reverse mortgage loan can help many seniors enjoy financial flexibility during their golden years. Retirees, in particular, can benefit from this type of loan because living on a fixed income isn’t always easy. These days, for instance, the rising rate of inflation means that even the most carefully constructed budgets may falter. Because of this, myriad older Americans are struggling to maintain their standard of living; in fact, many have a hard time even meeting their most basic needs. A reverse mortgage can help those who qualify to regain financial flexibility and enjoy their lives without worrying about money. One of the most common questions about these helpful loans is, “how do I get my money?” This is a very reasonable question, and the answer is important to know. After all, you need to have a full understanding of this loan before deciding if it is right for you. In today’s blog, Family Home Loan Texas discusses the ways that you can receive your funds from a reverse mortgage and how many choose to spend their money.
What Is A Reverse Mortgage?
When considering a reverse mortgage, it is essential to have a strong understanding of its basic components. A reverse mortgage, also known as a HECM, is a loan that taps into your accrued home equity and turns it into spendable cash. It is available to those who are 62 or older, and it must be taken out on your primary residence. This is a home in which you spend at least six months each year. While anyone who meets these requirements can get a HECM, it typically makes the most sense for those who have either fully paid off their original mortgage or those who have at least 50% equity in their home.
Once you have a reverse mortgage, you still retain full ownership of your home and will be able to live in it for as long as you like. Best of all, you won’t have to pay anything back to your lender until you stop living in the house. Interest does accrue, but given that houses typically appreciate in value, many seniors do find that when they or their heirs sell the home, they make enough money from the sale to not only pay back the loan but also have leftover funds to do with as they please. It is important to remember that while you won’t have to pay back the loan until you move or pass away, you still need to pay property taxes and insurance and will need to maintain the general upkeep of your property.
How You Can Receive Your Money
A HECM is all about flexibility so that you can receive your funds in several ways. If you need all of the money at once, you can choose a lump sum. With this option, you will get however much the lender is willing to provide at once, and you will pay a fixed interest rate on the money.
If you do not need the money all at once, you can also opt for regular payments, a line of credit, or a combination of both. Think of regular payments like the mortgage payments you make monthly. Instead of you paying a lender, they pay you. This is a good option if you have recurring bills or ongoing costs you need to cover. If you do not have anything specific you need to cover but want the security of knowing you have funds if need be, a line of credit is the way to go. With this choice, you will only pay interest on the funds you use, so you can potentially save money this way. You can also combine the previous two options to meet your unique needs. With these, you can have an adjustable interest rate.
How To Spend Your Funds
With a reverse mortgage, you can spend the money you get pretty much however you want. This is because the funds are coming from your home equity, which is your money, to begin with. This also allows the money you receive to be considered non-taxable income. Many people end up using a reverse mortgage to cover major medical expenses, significant home repairs, or tuition for loved ones. Depending on your needs, a lump sum, regular payments, or a line of credit could all be appropriate ways to receive your money.
Increasingly, people are choosing a line of credit to keep their investment portfolios intact. Instead of selling off stocks that could still make money and getting hit with a capital gains tax, you can get a reverse mortgage and use a line of credit to approximate the same security of an investment portfolio. Again, because you are only charged interest on the money you use, this is a very attractive option. At the end of the day, your needs are unique to yourself and your family, and you should meet with a professional to help determine the best course of action.
Contact Us To Learn More
We know reverse mortgages can seem tricky, but we are always here to help. Family Home Loan Texas was founded by loan originator and long-time mortgage professional Rob Bramer. Rob has helped clients secure the loans they need both locally and nationally and can help you get the loan you need to live life on your terms. Call 1-800-990-LEND (5363) to speak with Rob about a reverse mortgage loan and to receive a free, no-commitment consultation.