What are the smartest ways to use a reverse mortgage if you are considering these lucrative home loans for older Americans?
A reverse
mortgage is becoming a popular way to access your home equity and use
the funds to provide an added vehicle toward retirement security. Recent
studies have found that most retirees have about half of their wealth
held in their home’s equity as they do in other savings accounts and
retirement funds.
A reverse
mortgage has been lauded in recent years because it can deliver steady
income many years following retirement, throughout key golden years of
age 62 (when you become eligible for one) through age 70. This, in turn,
can enable retirees to defer Social Security payments,
allowing them to reach their maximum payout level. What’s more, reverse
mortgages don’t rely on current market conditions to pay out, and help
increase cash flow to the recipient by eradicating home loan payments.
Lump Sum
By far, this is
the most popular delivery method for reverse mortgages. It enables the
elimination of the monthly payment, thus increasing cash flow and
reducing overhead monthly expenses. It also results in a lump sum cash
delivery that can offset unforeseen expenses and provide a financial
safety net that covers anything that could suddenly arise, like
unexpected medical bills.
Line Of Credit
You can also
consider an HECM line of credit that is held in reserve. This gives you
the option to take out funds only when you need it. For instance, it can
enable you to protect savings in a bear market without having to sell
your investments or deplete your portfolio. When the market recovers,
returns on stocks can be used to pay down said line of credit. In
addition, an unused line can grow over time, and it is not able to be
frozen by the lender; provided that you adhere to the guidelines of the
home loan.
There are many things to consider when getting a reverse mortgage.
These are all topics that should be brought up with your financial
advisor beforehand. Simple rules do apply. These include that you be the
qualifying age of 62 or older; are the primary occupant of your home;
have substantial home equity available; can demonstrate that you are
able to maintain the home and pay property taxes and insurance.
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