Reverse Mortgage Lets You Tap Into Housing Wealth, Experts Say

A reverse mortgage has been a long used tool by older Americans and retirees as a way to utilize a portion of their existing home equity to help fund their retirement and assure a decent quality of life. And now experts are saying that it's "one of the most valuable resources they have," and that it's literally right under their nose, according to recent publication that appeared in Advisor Magazine.

With newer laws and regulations in place, much of the worry has dissipated for reverse mortgage borrowers and lenders alike. With new methods in place for approval, such as proof that the borrower can pay the property taxes, home upkeep and insurance, foreclosure and eviction rates have plummeted and predatory lending has been quashed. In particular, the mandated third-party financial counseling session has also helped educate borrowers before they sign, so they make as best an informed decision as possible. These addendums coupled with the non-borrowing spouse clause make the loans more attractive than ever before.

Why Older Americans Are Tapping Home Equity

The largest portion of American wealth is currently held by the baby boomer generation. A CNBC report finds that this totals more than $30 trillion that will be transferred over as the next generation comes into its own. Trillions of that figure consist of real estate assets. But with many older Americans facing rising health costs, inflation and dwindling pension or savings, tapping their home equity could be the most feasible decision that they make when looking for a quick cash influx that has lucrative terms.

A reverse mortgage lets them borrow a certain percentage of their home's equity with lump sum, line of credit or monthly payment options available. The loan is only repaid when the borrower dies or no longer occupies the house as their primary residence. For the countless older Americans who are shy of meeting their financial goals for retirement, these home loans do present a way and a means for them to access this accrued wealth to secure their lifestyle and future. Since they are not based on credit rating or income, but rather the market value of the home at the time of the sale, they are becoming a more viable long term solution.

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