Aging in Place — Reverse Mortgages
The race to the finish line of work years finds some people rich in real estate and somewhat shorter on cash than they had hoped. It is hard to stay disciplined to put aside monies in retirement vehicles month after month, year after year. One monthly payment that is never an option to skip is the mortgage. It may be partly psychological. You realize that you have to keep a roof over your head, whereas the future is so fuzzy and “out there,” it always seems like there will be time to deal with it — later. And skip a contribution to your 401(k) the year Jenny needs braces and who will ever know or care, besides you? A lifetime of making choices between immediate financial demands can end up keeping you securely in your home but with a slightly more anemic nest egg for your retirement than you had anticipated.
One way to make an omelet from a nest egg shortfall is to consider a reverse mortgage on your home. A reverse mortgage does just the opposite of a traditional mortgage. It gives you cash backed by the equity you have built up in your home.
How is a reverse mortgage different from a home equity line of credit?
A reverse mortgage, including interest, is not repaid until you move from your home permanently, your house is sold, or upon your death. A home equity line usually has a fixed number of years in which it is available and requires minimum payments for interest and principal when used.
A couple of alternatives to a full-blown reverse mortgage are deferred payment loans and property tax deferral loans. A subset of a reverse mortgage, property tax deferral loans can be used for a specific purpose. Like other reverse mortgages, there is no repayment as long as you live in your home.
