One of the biggest perks of a HECM reverse mortgage is it’s up to the borrower to decide how to use the funds, as well as how to receive those funds. And with the rapidly improving reputation of today’s reverse mortgage, those uses are being suggested more often and are becoming more creative. This wonderful financial tool, available to individuals and married couples 62 and over, is now being widely accepted by financial advisors across the nation. Here’s a few reasons why…
1.) A reverse mortgage can eliminate existing housing debt. In 2010 42% of seniors age 62 and over had housing debt. This is a dramatic increase compared to the 1992 estimate which was only 24%. Housing debt can be a huge financial burden to older Americans, whether it’s because they’re on a fixed income or because it interrupts the dreams they once had for their golden years. Using a reverse mortgage to pay off a conventional mortgage, or even a HELOC (Home Equity Line of Credit), can relieve some serious pressure in the borrower’s life, as well as adult children.
2.) A reverse mortgage line of credit can protect a retirement portfolio. During the 2008 economic crisis we all saw first hand how retirement investments are not guaranteed. But an FHA insured reverse mortgage line of credit is. Using home equity to take out a reverse mortgage line of credit now offers a second level of protection against economic pitfalls and the impact they may have on a retirement portfolio in the future. And unlike a conventional home equity line of credit, the reverse mortgage line of credit is not accompanied by a loan payment until the last borrower permanently leaves the home or passes away.
3. ) Age at home and fund in-home care with a reverse mortgage. One of the most common things I hear from those seeking a reverse mortgage is that they want to age at home as long as possible. Why wouldn’t they? The funds from a reverse mortgage can allow the those wishing to stay at home, to do just that and fund any care needed.
4.) Delay Social Security payments until the maximum benefit is available at age 70. The funds from a reverse mortgage can be used as a bridge to put off tapping into Social Security payment before they’re worth their max. Then once the Social Security is accessed, the borrower will receive funds from both.
5.) Reduce tax burden by reducing taxable income. The funds from a reverse mortgage are not considered income, meaning they are not taxed. This can be a huge benefit when other options to bring in cash include taxable incomes such as working and withdrawing from taxable retirement investments.
For those 62 and over reverse mortgage is an excellent option. Homeowners can access the equity in their home, live mortgage and loan payment free, and no repayment is due until the last borrower passes or permanently leaves the home, or they default on property taxes or homeowners insurance. For some retirees, it could mean the difference between living and living well.
Sara Cornwall is a local Reverse Mortgage Advisor serving the entire state of Connecticut. Contact Sara and learn if reverse mortgage is right for you.