Reverse mortgages make healthcare easier
It is no secret that most health care spending comes later in life. This, unfortunately, is when illness, hospital stays and rehabilitation become much more common – and expensive. For those in retirement, especially if they are living on fixed incomes, the high costs of healthcare may prohibit certain types of treatment. There is a solution, though. You could use your home as a way to finance your health care while you continue to live in it. In the process, you won’t have to pay a penny in taxes for the extra money.With a reverse mortgage, the bank pays you. The payments come from a loan that the bank provides, and the amount that you can receive depends on the value of your home and your current age. A higher home value and more advanced age will result in larger monthly payments from the bank, as there is more principal against which to borrow, and the bank does not expect to make payments for as long as it would to a younger borrower. To participate in a reverse mortgage transaction, you must be at least 62 years old.
The borrower does not make any payments while collecting on a reverse mortgage. Upon the borrower’s death or decision to move, the account is settled. The sale of the house – either by the borrower or his estate – is used to repay the bank for the proceeds of the reverse mortgage. Any funds remaining from the sale of the house are given to the homeowner (or the homeowner’s estate) in compensation for any equity he had in the property following the reverse mortgage. With a reverse mortgage, you collect now and pay later – the reverse of a traditional mortgage.
The proceeds from a reverse mortgage are tax-free. The government does not tax reverse mortgage proceeds because it can’t! The funds that the borrower receives are not income; instead, the money comes from a loan. The loan is just structured a bit differently from most other loans. But, since there is no actual income in this transaction, the IRS cannot get involved.
The high costs of health care, especially later in life, may make a second source of cash important, especially if home health care, a hospital stay or lengthy rehabilitation is necessary. Pensions, savings and Social Security payments can do little to help when one is faced with an astronomical doctor or hospital bill. A reverse mortgage can make this process a bit easier. You can use the equity that you have in your home to make health care more affordable.
Put your home to work for you. You spent a lifetime paying for it, and now is the time that you can regain some benefit. If you are struggling with the high cost of health care, own a home and are over age 62, a reverse mortgage is worth a look. It could be the key to a healthy retirement!
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