April 12th, 2018 9:42 AM by Michele Morse Reen
With a reverse mortgage (technically known as a home equity conversion loan or HECM), homeowners over the age of 62 may use home equity for anything they need without selling their homes.
With a reverse mortgage, the loan is based on your home equity. You can decide how you would prefer to receive your funds: by a monthly payment, a line of credit or a lump sum. You don’t have to pay the loan, interest accrued and finance charges back until you sell the home or move into a care facility.
Many homeowners find reverse mortgages advantageous for their circumstance.
There are a lot of great reasons to take advantage of a reverse mortgage and we have decided to list the top three reasons why our clients rave about them.
Reason #1 Invest that money. The saying goes, “It takes money to make money.” A lot of retirees have money sitting in their home’s equity not doing much for them. However, many retirees are finding that they can use that equity to put it to good use. Some retirees have taken a reverse mortgage and purchased property that they can rent out to bring them more income. Social Security benefits don’t always offer enough to live a comfortable lifestyle. So, if you’re looking to supplement your retirement income, you can get a reverse mortgage to get a lump sum large enough to buy property you can rent out. In some cases, retirees are making $2,000 to $3,000 a month in extra income off their rental property.
Reason #2 Retire early. As individuals get older, it becomes more difficult to work full time. Whether for health reasons, or lack of high-paying jobs for seniors, sometimes early retirement is the best option. However, continuing to pay a regular mortgage can become a challenge for many seniors and early retirement may not be an obvious option. However, with a reverse mortgage, seniors over 62 can take their regular mortgage payment and put it into bills and a retirement account, such as a 401(k). Those investments will keep growing for several years, making you more money than it otherwise would have as equity. You may be better off leveraging the equity in your home and keeping the retirement savings in place because that’s earning more money. So, you can take that money to build a retirement savings that can last 10 to 20 years after you stop working. Or, if you have plenty in savings, you can stop working 10 years earlier because you planned.
Reason #3 Travel. Using a reverse mortgage for travel is used for seniors who have already planned for retirement and have savings tucked away, but don’t have enough disposable income to travel to places they’ve never been, or they want to address other wants on their bucket list. Some people live and work their whole lives and never get a chance to visit places they’ve only dreamed of visiting. There is a space of time in everyone’s life when there is time for travel and your health is relatively OK. Work has subsided, the kids are grown and you don’t need around-the-clock nursing care – a lot of time, but nothing to do. This is the time when seniors should take advantage of what they have worked hard for, such as utilizing the equity in their home, and using the time they have left wisely.
Don’t wait until you’re too old to travel. Use a reverse mortgage to travel so that you can look back fondly at the trips you took with your grandchildren, spouses or friends. Those are some of the greatest memories we can take with us through the journey of life.
Reverse mortgages do not affect your Social Security and Medicare benefits. Plus, the funds are non-taxable. Reverse Mortgages may have adjustable or fixed rates. Your home will not be taken away if you live past the loan term, nor will you be obligated to sell your residence to pay off the loan even when the loan balance grows to exceed current property value.
Contact us at (408) 626-1879 if you want to explore the advantages of reverse mortgages.