A reverse mortgage can be used in a variety of ways, all of which could potentially increase your standard of living during retirement. It’s a misconception that reverse mortgages are only for the desperate homeowner, and for this reason, many great candidates are left behind. Get educated so you know if a reverse mortgage is right for you. Here are three ways people use a reverse mortgage:
Need
Yes, a reverse mortgage is a great option for someone who is in need of cash to pay bills, for in-home care, to repair or renovate your home, or for medical expenses as you age in place. It’s not always out of desperation, rather a need for more cash to pay for things that would otherwise have to come out of pocket or from a different loan. These traditional Home Equity Conversion Mortgage borrowers are house-rich and cash-poor, and they simply need more money. The funds can be used to help the borrower, or even their heirs, pay for these life necessities.
Lifestyle
Unlike a traditional mortgage, a reverse mortgage does not require monthly payments and obtaining one can help with cash-flow. A line of credit (LOC) may be established to pay for home upgrades or home safety precautions for elderly parents, travel, or even a new car! A reverse mortgage is a great way to improve your quality of life, especially for someone living on a fixed income such as a retiree.
Planning
It’s common for homeowners to plan to sell their home to receive the funds they need for retirement. Drawing part of their monthly cash from home equity will help their traditional retirement funds last longer than they would have! And, you can stay in your home! You may even be able to delay taking Social Security!*
The primary financial planning benefit is the LOC you can obtain that grows in the borrowers favor and can be a great tool for retirement planning.
Whichever way you decide to use a reverse mortgage, it's a good idea to consult with a financial professional to ensure you are making the best decision for your financial future.
Sources:
Hultquist, Dan. “Home Buying Guide: Reverse Mortgage Made Simple”. 2020.
*https://www.americanadvisorsgroup.com/news/reverse-mortgage-retirement-strategies#:~:text=Using%20this%20approach%2C%20a%20reverse,then%20made%20from%20the%20portfolio.