With all of this talk about a reverse mortgage payout for qualifying older Americans, how much can you really get? We'll provide some simple examples so you can get a better idea.
Average Cost of Retirement
If you are wondering why many older Americans are seeking a reverse mortgage, the answer is right before your eyes. The average cost of retirement, according to Can I Retire Yet is approximately $3,750 per month in the U.S. They say that annually it can easily exceed $40,000, depending upon your lifestyle.
Certainly, this is not chump change, by any means. Naturally, this large number can leave many people reeling, reexamining their budgets and trying to better prepare their savings plan for the costly future that is most certain to someday come.
How Can A Reverse Mortgage Help?
A reverse mortgage is a home refinancing option that's available to qualifying older Americans age 62 or above. Key requirements include that you retain a substantial amount of equity in your home and that you occupy your home as your primary residence. There are no income or credit requirements. Not all candidates will be approved.
Here's a good example of how a reverse mortgage payout could help you more easily meet your retirement goals. Let's take Jim for example. He's age 70 and his wife Nora is age 62 - both of qualifying age for a reverse mortgage.
They have a home that's valued at $200,000 but they are a bit short on meeting their financial goals for retirement. The monthly payout options on the reverse mortgage would be based upon the age of the youngest spouse in this scenario.
According to the reverse mortgage lenders association's calculator, providing they have ample equity, they could prospectively receive about $80,000 in a lump sum or in a line of credit that can increase by 4.6% each year. They could alternatively request monthly payments of $509, as long either one of them retains primary residence in the home. This is, of course, based upon interest rates calculated by the one-year U.S. treasury.
Using a better method that is calculated using LIBOR would give them a lump sum of $88,119; or the equivalent line of credit plus 3.9% increases each year; or monthly payments of $535.
In this scenario, the couple would be best off using the LIBOR calculation because it gives them the biggest payout.
Granted, this is just a basic example of how a reverse mortgage could help Joe and Nora more easily meet their monthly obligations. Bear in mind that each situation and payout is going to be different, and yours will, too.