A reverse mortgage is a non-recourse loan that releases home equity and converts it into tax-free* cash. Homeowners continue to own and live in their own home and can use the cash any way they want–with no monthly mortgage payments–for as long as they choose to reside in their home.
Whether their goals are to augment income; pay for prescription drugs, long-term care insurance, or specialized medical treatment; or just have the money to travel and enjoy life, a reverse mortgage could be the key to helping someone retire richer.
Understanding a reverse mortgage
Think of a reverse mortgage as the opposite of a traditional mortgage. With a traditional mortgage, the homeowner borrows a large sum of money and makes monthly payments. As payments are made, the loan balance decreases and the equity grows.
During the life of a reverse mortgage, homeowners are “borrowing” money they already have built up as equity in their home. As they use the cash to pay for the things they want or need in retirement, the loan balance gets larger and the equity is reduced. Borrowers are using equity to increase income.
It is important to understand that with a reverse mortgage borrowers will own and live in their home for as long as they choose.
A variety of products means versatility and options.
At Gateway Funding, we offer seniors a menu of distinct options for customizing a reverse mortgage to meet their unique needs. Working with you, a Gateway Funding Reverse Mortgage Specialist will review each senior homeowner’s situation, discuss goals, and customize a plan that best fits his/her retirement dreams.
Reverse Mortgage estate planning recap:
- All borrowers must be 62 years or older
- Maximize legacy asset transfer
- Purchase life insurance with tax-free income that translates into a larger death benefit
- Since a Reverse Mortgage is considered a loan against the property, it lowers the taxable portion of the property
- Provide funding for healthcare and medical expenses
- Provide funding for estate taxes
- No repayment is made until the home is sold or the owner permanently moves out or passes away
- A person will never owe more than the value of the home
- No income, credit, or employment qualification
- Interest is paid at the time the loan is repaid
- When the loan is due, the heirs have choices– they can repay the loan and keep the house, or sell the home and repay the loan
- Social Security benefits and Medicare are generally not affected by a reverse mortgage; however, please encourage your clients to consult appropriate government agencies regarding their situation
- The borrower can remain in the home and the lender never takes control of the title
- Closing costs and fees incurred can be financed as part of the loan
- U.S. Government Guarantee
*Consult your tax advisor.
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