A reverse mortgage is a great compliment to traditional financial planning
Complement Retirement Planning
A reverse mortgage converts an “illiquid” asset (your home’s equity) into accessible funds so you can utilize this resource in retirement.
Some find success in using their reverse mortgage in the event of a market decline. Rather than drawing on your portfolio when the market is down, you can use the funds from the reverse mortgage. When your portfolio begins to recover, you can reevaluate your use of the assets tied to your portfolio. This approach may allow your portfolio to last longer into your retirement years. You can also decide whether to repay the reverse mortgage at that time, though repayment is not required until you no longer live in your home.
Reverse mortgage funds are not income and therefore, not subject to income taxation. You can help minimize income tax or capital gains by allowing your taxable assets to remain in place and using reverse mortgage proceeds.
Establish Cash Reserves That Grow
You can place some of the equity in a standby, line of credit that will increase in value, yet will be readily available when you choose to access it. Unlike a traditional home equity line of credit, a reverse mortgage cannot be reduced, frozen or cancelled. Also, a reverse mortgage does not require monthly, repayments like a traditional home equity line of credit would.
Seeing is believing. An amortization schedule for a reverse mortgage can show how the line of credit you set up using the equity you have stored in your home can grow over time.
It may be rewarding to see others benefit from their inheritance now. As always, you decide how to use the funds from your reverse mortgage. Some folks have used them to help cover educational expenses for grandchildren or provide care for a family member.
HECM For Purchase
You can purchase your next home using a reverse mortgage.
Since 2008, reverse mortgages have been used to assist those 62+ in purchasing their next home without taking on monthly mortgage payments. There are numerous benefits to the homebuyer that allow them to qualify for a home, without using all their liquid funds.
Whether you are “rightsizing” (downsizing or upsizing), moving closer to friends and family, or to a home that is better suited for your current needs, a Reverse for Purchase can make sense. Like all home owners, you are expected to keep your real estate taxes and homeowner’s insurance current and maintain your home’s basic upkeep. Just like a traditional reverse mortgage, when you no longer occupy the residence the loan will become due. Any remaining equity that has been built up will go to you or your heirs. If those designated in your will want to keep the home, they can refinance the home for only what is due. This product is also a non-recourse loan, so the balance due will never exceed the value of the property.
Nina Penny - Certified Reverse Mortgage Professional © 2019