Is a reverse mortgage right for you?

Is a reverse mortgage right for you?
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Growing older comes with all sorts of perks. More wisdom. More discounts. More time to spend with the people you love. It also means you become eligible for a reverse mortgage, giving you another option for leveraging your home equity.


A reverse mortgage allows homeowners who are 62 or older to convert their equity in a home into cash — without having to sell the home or make additional payments. One in three older Americans view their homes not just as a place to live but as collateral for a loan. Just as many homeowners get a home equity line of credit or cash-out refinance, today’s seniors are increasingly opting to tap into their equity with a reverse mortgage, which can be a helpful tool for boosting income security or funding your retirement dreams.


Before taking on a reverse mortgage, however, it’s important to learn about how it works and whether it’s the right choice for you.


Understanding reverse mortgages

With a standard loan, you borrow money and pay it back over time. With a reverse mortgage, however, the lender pays you a sum based on your equity, and you don’t need to worry about paying it back as long as you still live there. You even get to keep the title to your home.


A reverse mortgage uses up the equity in your home, leaving you with fewer assets to pass on to your family. Once the last surviving borrower no longer occupies the home, the loan becomes due. Surviving relatives can then choose to refinance the mortgage, just as with any mortgage, or sell the property and pay of the mortgage balance.


When to choose a reverse mortgage

A reverse mortgage can rescue your finances when budget-busting expenses arise. However, it’s important to consider what taking on this type of loan means for you. A reverse mortgage diminishes your assets, and it comes with some fees and costs. Make sure you understand the total annual loan cost, explore all of your options and consider the potential implications for your financial future. An OCCU mortgage loan officer can help navigate these options and help select the best solution for you.


As you ponder your choices, the most important question to ask is what you plan to do with the money. Pay off medical bills? Pay property taxes after retirement? Make major home repairs? Supplement your monthly income to help pay living expenses? Reverse mortgages typically come in three flavors, and your answers to the questions above will help determine which fits your situation.


  • Single purpose: These loans can be used only for a single purpose specified by the lender, such as home repairs or property taxes.
  • Proprietary: If you have a high home value and small mortgage, these privately backed loans can help you get a bigger advance on your equity.
  • Federally insured: Also known as Home Equity Conversion Mortgages (HECMs), these loans can be used for any purpose.


With expert guidance, a reverse mortgage can help older homeowners supplement their retirement funds. Talk to our in-house expert, Susan Busch in our Salem location, on reverse mortgages to determine whether it might be the right path for you.