The finance industry is constantly changing. Between regulations, technological improvements, product evolution and industry sentiments everything is seemingly in a state of flux.
Industry sentiment is one that tends to be the most difficult to manage. Everyone has thoughts and feelings and we don’t always agree, but occasionally these sentiments become magnified for better or worse. One product has a long history of being disparaged, potentially unfairly. I can preemptively hear the groans now, but Reverse Mortgages can be a great tool for a number of people, if used properly.
Reverse Mortgages have a stigma going as far back as people can remember. There are fears of losing houses, leaving nothing to heirs and a general dislike that is quite unfounded. Reverse mortgages came on our radar a little while back. At first, we, like many other scoffed at the idea. I mean they have been portrayed as a desperate last resort, or even as far as saying “The American Dream becoming The American Nightmare”. But upon further inspection we have realized that if used correctly reverse mortgages can be a very versatile tool to help people through retirement.
The first thing to understand is that the bulk of Reverse Mortgages are Home Equity Conversion Mortgages or HECMs. HECMs are insured through the federal government by the Department of Housing and Urban Development (HUD) and the Federal Housing Authority (FHA). This is important because it means that you never give up the deed to your house, nor would you ever owe anything more than its worth. Secondly, all proceeds from the loan are tax free, which means there is no potential for additional taxes on Social Security or higher Medicare premiums. You are also able to take the proceeds from the loan in a variety of ways, each of which has its own benefits.
Like I said earlier though, Reverse Mortgages aren’t for everyone. Like most products out there if used property, for the right reasons they can be a great tool to help retirees get through retirement. As we move forward, don’t be surprised to hear us mention these as a possible addition to your existing plans and if your interested to know if a Reverse Mortgage can help you don’t hesitate to reach out.