CBS News examines the potential benefits of reverse mortgages
Reverse mortgages for seniors aged 62 or over could have a range of potential benefits, although seniors who are seriously considering researching a potential loan should do their research to find out how such a product could more specifically affect their financial situation. That’s the view shared in a column published this week on CBS News’ Money Watch.
“If you’re in this age bracket, you might want to consider one of these loans, especially if you’re looking for extra income or to eliminate monthly housing costs in retirement,” the column says. “Reverse mortgages, while often beneficial, are not for everyone. You will need to consider your personal financial situation, goals, and other factors to confirm that these loans are right for you.
The column goes on to list four potential benefits a reverse mortgage could bring, focusing first on the prospect of getting extra cash to use as the borrower sees fit.
“You can invest the funds in daily expenses, a trip, paying off debts, investing, or meeting any other financial goals you may have,” the column says. “It can also serve as supplemental income, especially if you choose monthly payments. These can be a great way to offset any loss of income you will incur in retirement.”
A second potential benefit is that using loan proceeds could reduce a borrower’s monthly outgoings, particularly with respect to an existing mortgage payment, the column says.
“If you still have a balance on your mortgage, you will first need to use the funds from your reverse mortgage to pay it off,” it reads. “While this reduces the total amount of funds you can access, it also has a huge benefit: you no longer have a monthly payment. This, combined with the extra income you get from your reverse mortgage payments, can make retirement much more comfortable.
The third potential benefit is that a reverse mortgage allows a senior to age in place, since the terms of a reverse mortgage are only suitable for someone who is determined to stay in their home for the long term.
“Selling your home or downsizing is one way to access your home equity in retirement, but not everyone is willing – or even able – to move. If you prefer to keep your home and your age in place, a reverse mortgage can be a smart alternative.
Money from loan proceeds can also be used to further strengthen the home’s ability to more adequately meet needs that may arise as an older person ages, including home modifications such as bars. support, rails or other assistive devices, indicates the column.
Finally, the fourth advantage listed concerns the fact of not having to pay additional taxes.
“While reverse mortgage payments can often feel like extra income, they aren’t taxed like that,” the column says. “In fact, the IRS is actually saying that the reverse mortgage funds are the proceeds of a loan, so you won’t owe tax on the payments you receive. That’s just another way they can help you reduce your expenses in retirement.”
The article ends by encouraging seniors considering a reverse mortgage to know all the details and how it might affect their financial situation before moving forward.
“There are downsides to reverse mortgages too,” the column reads. “On the one hand, they put your house at risk. If you are unable to keep up to date with your property taxes and home insurance, the lender could foreclose on your home.
CBS recently ramped up online content related to reverse mortgages, including a recent column encouraging exploration of the product. Read the latest column from CBS News.