More and more people in their golden years are looking at reverse mortgages as a possible money stream for their retirement years. A reverse mortgage is where a person or a couple, typically age 62 or older, taps into the equity in their home but there are no monthly payments to be made and they can stay in the house as long as they live.
As may be expected, there are a number of different kinds of reverse mortgages. One can get either a lump sum from a lender, a monthly payment from the lender, or a line of credit from the lender that the borrower can use as desired. Reverse mortgages are unique because there are no monthly payments, no credit applications, and no credit checks. They simply require that you have enough equity in your home.
A reverse mortgage may not be for everyone, however. Like ripples on the pond, this decision has important consequences. A reverse mortgage will have consequences on your estate planning; perhaps even unanticipated consequences. Just one consequence is that a reverse mortgage might leave you with nothing to leave to others when you die. Because of the serious ripple effects of a reverse mortgage, it is imperative that you have legal counsel before making this decision. At Menges & McLaughlin, P.C., our attorneys will review your estate and future planning goals and advise whether a reverse mortgage makes sense in light of them. So, before you sign over your home to a lender for good, please give us a call to discuss how this will affect your future goals and plans and to see whether this is the best decision for you and your family at this time.
It cannot be stressed too emphatically that a reverse mortgage is a very complex transaction and a person absolutely needs to have the advice of one's attorney before entering into such a complex transaction. Moreover, a reverse mortgage needs to be looked at in light of an overall estate planning scheme. Understanding what reverse mortgages do and, perhaps more importantly, what they don't do, requires a thorough explanation from one's attorney, because typically with a reverse mortgage there is little or nothing left in the estate, once the homeowner(s) dies and, therefore, one is truly mortgaging one's ability to leave the home as part of one's estate. At Menges & McLaughlin, P.C., we like to tell people to look at a reverse mortgage more as a transaction in which one sells the home but is able to continue to live in the home, payment free, until both homeowners die but there is an opportunity at the end to redeem the property, at least typically, for a lump sum amount of money.
No doubt reverse mortgages are going to be used by more and more older couples and homeowners whose retirement assets are not sufficient for retirement. They can be helpful in that regard but must be looked at very thoroughly and must be understood to be a very intricate and complex transaction.
