Planning for retirement takes discipline and fortitude as you spend your younger years building up equity and putting away savings, bit by bit. Reverse mortgage lenders may advise you to tap into the equity of your home, but first, you should know how the loan works.
Reverse Mortgages and Home Equity Conversion Mortgages Are the Same Thing
Once you understand what a reverse mortgage is, both of its names suddenly seem more apt. Home equity conversion mortgages (HECM) are much like any other mortgage, only in reverse: the lender pays the borrower in the form of withdrawals while the borrower pays nothing as long as at least one of the co-borrowers lives in the home.
The intent of the loan is to help provide the means for you to retire while staying in your home. Reverse mortgage lenders can help you decide how to budget the loan or how to set up credit using the loan. Be aware that foreclosure is still a possibility should you allow the property to fall into disrepair or if you neglect property taxes or fail to keep up on home insurance. Lenders, of course, are invested in the value of your home, especially since you do not need to pay back more than what the home is worth.
Who Provides Reverse Mortgages?
Banks are not the only reverse mortgage lenders available to you. Financial companies may also offer HECM and other retirement financial planning services. If reverse mortgages appeal to your retirement needs, take note of any questions you may have. If a lender is right for you, you should be able to consult with a knowledgeable loan officer.
Before you commit to a loan, you will meet with a nonaffiliated counselor who has been approved by the government. This way, you can rest assured whether or not a reverse mortgage is truly a sound decision for your financial future.