Retiring? What you need to know about reverse mortgages

Published 6:00 am Thursday, April 25, 2019

When preparing for your first home, you take on a mortgage. Now when you’re about to retire, what do you do?

These were the questions that Kris Heichel of Fairway Mortgage Company hears about regularly. However, there are resources available for retirees such as a reverse mortgage.

A reverse mortgage is a type of loan that’s not asked about as much, but Heichel believes should be.

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“I am not asked about this option as much as I would like because when used strategically, a reverse mortgage can greatly improve an individual’s retirement,” she said. “We are here to provide the education and allow the homeowners to make an educated decision, but that cannot happen without the knowledge.”

A reverse mortgage is a loan available to homeowners who are 62 years or older, which allows them to convert part of the equity in their homes into cash. This was created as a way to help those who were retiring with limited income to use the accumulated wealth in their homes to cover basic monthly living expenses and pay for their healthcare.

There aren’t any restrictions in how reverse mortgages can be used, and it’s called a reverse mortgage because the lender makes payments to the borrower instead of monthly payments to the lender.

With this type of mortgage available, Heichel said that more retirees should be made aware of the opportunity. Also with a reverse mortgage, a home can be purchased as opposed to the belief that it’s only to refinance their current residence.

“I feel that a lot of retirees do not know about reverse mortgages or they have only heard the negative myths and misunderstandings,” Heichel said. “We at Fairway are here to provide education to consumers and professionals, and change the way retirement is done in this country.”

With this type of loan, the borrower is also not required to pay it back until their home is sold or vacated. As long as they live inside their residence, they’re not required to make any monthly payments toward their loan balance, and must remain updated on property taxes, homeowners insurance and homeowner association dues if applicable.

As for any negatives to going for a reverse mortgage, Heichel shared that unless a homeowner decides to live in another home as their primary residence while keeping the reverse mortgage on a different home, or failing to pay their property taxes, homeowners insurance and maintenance on the home, then there aren’t really any cons to opting for a reverse mortgage.

“We hear the phrase ‘this seems too good to be true’ pretty much any time someone begins to understand how it works because it really does seem too good to be true,” she said. “I would do this for my family, friends, neighbors, pretty much everyone I come in contact with. I will do my own reverse mortgage as soon as I’m eligible.”

Senior Living • April 2019