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.
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.