Is a Reverse Mortgage a Lucrative Option With Your Financial Situation?

While many have looked at a reverse mortgage as a viable retirement vehicle for those who may need an injection of capital, it can also be just as advantageous to those who are well off, too.

A white paper that was published by doctors at the Edinboro University of Pennsylvania brings some interesting shifts in thought to the reverse mortgage scenario. One recommendation made in the paper was that a reverse mortgage line-of-credit is more lucrative than selling investments.

Basically, a reverse mortgage line-of-credit can provide cash injections when portfolio values deplete (which can make it hard to make ends meet). For example, the researchers found that a portfolio with a value of $500k, when paired with a reverse mortgage line-of-credit worth $250k, drastically improved the odds of preserving the portfolio value over the lifetime of the retiree.

Tax Benefits

Another area where a reverse mortgage makes sense, regardless the financial situation, is with the tax benefits. Commonly, retirees will use 401(k) funds, or other savings, to pay off a mortgage. But, if there's enough equity in the home, the reverse mortgage could be used instead of using tax-deferred savings (which can put a retiree in a different tax bracket for the year if too much is withdrawn at once).

The paper also noted that retirees can still work the reverse mortgage out where they'd be able to avoid eclipsing the income threshold where their Social Security benefits become taxable.

Get Expert Advice

A variety of options exist with a reverse mortgage that are lucrative regardless your income level or financial comfort during retirement. Make sure that you get expert advice on a reverse mortgage and how it relates to your specific financial situation to more easily arrive at a conclusion. A great place to start is with speaking to a reverse-mortgage counselor. You can find one in the HUD directory.

For many retirees that have equity in their homes, a reverse mortgage is a solid option during retirement. Like other types of home loans, there are many facets to these ones. Assure that you take the time to fully understand your options, and you can make a sound decision that offers the greatest benefits for your retirement plan.

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