A reverse mortgage might be an option for accessing the equity in your home, but it’s not for everyone. This unique type of loan is typically available to homeowners age 62 and older with sufficient equity in their primary residence.
A reverse mortgage is a special type of loan secured by a home’s equity. Still, there’s a lot of confusion about how these loans work.
Here are 10 reasons you should consider a reverse mortgage.
1. Provide a Financial Cushion During Retirement
2. Update Your Home With a Reverse Mortgage
4. A Reverse Mortgage Can Help You Buy an RV
8. Purchase a Life Insurance Policy
9. Grow Your Wealth & Beat Inflation
A growing number of senior citizens find themselves strapped for cash, living on a fixed income determined by social security benefits. Life can be expensive despite our best attempts to plan for our financial futures. More than 40% of retired seniors currently rely on social security alone for support.
However, many seniors also own their homes with little or no balance on their mortgage. Often, they have had the benefit of a lifetime to pay down their mortgage, leaving them with considerable equity. That money can be accessed using a reverse mortgage to ease the financial stress of a fixed budget.
After decades of building a life in your home, there are often big expenses to update the house or make necessary repairs to keep things in good shape. For some, the fixed budget during retirement means that many repairs will go without being done.
A reverse mortgage can be one way to finance big expenses when you need to make a repair.
With a lump-sum disbursement, you can access the equity in your home to pay for a new roof, new windows, a furnace, or a remodel. If you keep home repairs up-to-date, you can safeguard the value of your home for years to come.
From consolidating higher-interest debt to eliminating the balance on your mortgage, a reverse mortgage can help you get out of debt. While a traditional mortgage comes with monthly payments–eating up hundreds or even thousands of dollars per month, a reverse mortgage is typically settled along with your estate–giving you freedom from the monthly payments.
If your home is already paid off, but you’ve accumulated other types of debt, a reverse mortgage might be an excellent way to consolidate your debt and right the financial ship.
Once you’re retired, you have all the time in the world. What is it that you would like to spend that time doing? Free up some cash with a line of credit through a reverse mortgage that gives you an influx of funds to finance your next adventure.
Maybe, you have always wanted to buy a boat or an RV. Perhaps you have dreamed of spending a year in France or sailing on a cruise ship. With the freedom of retirement, anything is possible as long as you have the money.
Many retirees are sitting on a reserve of money tied up in real estate. A reverse mortgage gives you access without a monthly payment.
One of the most disheartening realities is that with age–comes ailing health. The cost of medical care in the US is high.
Individual healthcare scenarios vary, but for the average 65-year-old, it’s not uncommon to spend between $3,300 and $7,700 per year on healthcare. And with single hospitalization, that sum jumps to $81,000.
Medical debt is a significant financial burden, especially for the elderly. One way to eliminate medical debt is to use a reverse mortgage.
A lump-sum disbursement allows you to access the equity in your home without adding another monthly payment to your fixed budget.
Now that you’re retired, you might also finally have time to spend on that hobby you have always wanted to do. If you love woodworking, use the equity in your home to build a workshop.
While a personal loan comes with a high-interest rate and a monthly payment, a reverse mortgage taps into funds you’ve already invested to finance your loan.
Another stress-inducing expense that pops up in your golden years is the potential for long-term care needs.
In one study that surveyed costs across more than 40,000 nursing facilities, the average monthly cost was between $3,045 to $5,893 per month. That’s a big pill to swallow.
One way that some seniors are navigating this expense is by using a reverse mortgage to access the equity in their real estate.
Similarly, life insurance policies that provide funds for various purposes can also be utilized to cover long-term care and end-of-life costs. The sticky thing about life insurance is that, as you age, the premiums go up.
If you suddenly need to bulk up your life insurance after age 62, you might also be looking for ways to finance those premiums. Since nobody knows how long they might live or how long they’ll need long-term care, an insurance policy might be your best bet, and a reverse mortgage can help you get the coverage you need.
We’re all battling high inflation in 2022. According to economists, it’s at a 40-year high. That means that our goods cost a little more than they used to and our money doesn’t go quite as far. Inflation is tough for anyone, but especially for those in retirement.
During this time, retirees tend to spend their investments to afford the cost of living. One way to beat inflation is to borrow with a reverse mortgage before interest rates increase.
The biggest benefit here is the ability to access wealth that is otherwise tied up in real estate. And with the market at peak levels, homeowners have more equity than ever.
While many homeowners would naturally consider a home equity line of credit, uncertain economic times and the prospect of no monthly payments presents another opportunity to access the funds tied up in your home.
Another way that retirees are navigating the tight feeling in their pocketbooks is by adding income streams.
For example, a reverse mortgage can help you purchase a second property that can become a source of income.
From single-family residential rentals to commercial office space, various options in real estate can provide a monthly income stream.
A reverse mortgage can be a strategic opportunity to navigate some of the financial challenges that pop up during retirement.
This unique financing opportunity can help seniors age 62 and above tap into the equity they’ve built in their homes without saddling them with a monthly mortgage payment.
More importantly, a reverse mortgage is a tool for many different situations. It’s more than a lifeline when retirees run out of money; it’s a way to plan, prepare, and provide a cushion for big and small expenses.
Photo credit: Spotmatik
