Today’s baby boomers hear a lot of advice being given to people in their late teens, twenties and thirties about needing to put money aside for their retirement. While its great advice for the younger crowd in this day and age; but, for the baby boomers retiring today – they weren’t given that same advice 25 years ago. Some retirees have looked into a supplemental retirement income with full time and even part time jobs; but most soon to be retirees are looking at a reverse mortgage on their homes to try and make some form of retirement lifestyle as comfortable as possible. Whether consulting with a retirement planner or retirement coach, some baby boomers are seriously looking at leveraging the equity in their homes to pay for retirement.
These baby boomers who are retiring soon or who have already retired and begun to run out of funds will often tap into the equity in their homes in order to pay for the necessary essentials of life – or may even be considering getting a reverse mortgage to pay for their grandchild’s college tuition, home renovation, dream vacations and sometimes even medical care. Needing to come up with a lump sum payment or have payments spread out over time, some retirees will tap into their homes equity through a reverse mortgage versus a traditional refinancing loan. Baby boomers who choose a reverse mortgage don’t make loan payments; quite the opposite. The lender will give the baby boomer a lump sum payment or will make monthly payments to them.
Reverse mortgage loans are not traditional loans, but, one must keep in mind they are still loans and may be a faster way of receiving money for someone in need of quick cash. Reverse mortgages are normally made on a home that is the principal residence of the home owner. As well, a reverse mortgage is only made available for people who are 62 years of age or older.
While all loans must be repaid, a reverse mortgage loan works a little differently in the sense of payments. But, what still remains the same is that “interest” must still be paid against the mortgage… and the interest does accrue on loan payments made to retirees. If a mortgage lender pays the retiree $1000 per month for 15 years at 6.5% interest, the retiree will owe the lender the interest on all loan payments during the 15 years it took to be paid for the note. Typically a lender is considered paid when one of two things happens to the homeowner: 1. The home owner sells the home, or 2. the home owner dies.