How can seniors access their most valuable asset?
Many homeowners 62 and older are facing a retirement quandary. Their wealth is tied up in their home—two-thirds of the average retiree’s net worth is home equity. As long as that money is tied up it has the same cash value as Monopoly money.
The New Reverse Mortgage may be just the solution they’re looking for.
Why aren’t more seniors getting a reverse mortgage?
The National Reverse Mortgage Lenders Association figures that only about 3% of eligible borrowers have one. Many financial advisers and consumers continue to think of reverse mortgages as loans of last resort.
I guess it’s true that “old habits die hard”. The same can be said for myths about reverse mortgages. In the last few years many of the detriments of reverse mortgages have been exorcised from the program and new features added that will help more seniors enjoy a secure retirement.
Even financial planners are getting on board.
Financial researchers have found that a reverse mortgage taken as a credit line early in retirement can grow, providing steady income or buffering financial shocks, even for well-heeled borrowers.
We got a reverse mortgage because it raises our retirement comfort level
Bill and Maureen Deller of Marana, Ariz., near Tucson, took out a reverse mortgage in mid 2017 as a kind of insurance policy. The couple, both in their mid seventies, have a “reasonable” retirement portfolio, says Bill. They also collect Social Security and have long-term-care insurance.
“We really don’t need the reverse mortgage financially,” says Bill, “but it makes us feel more comfortable that if we need it, we’ve got it.”
How much money am I eligible for?
Without question the number one question we’re asked by seniors inquiring about a reverse mortgage.
Your borrowing power depends on the age of the youngest occupying borrower, the value of your home and current interest rates.
How does a reverse mortgage affect my Medicare benefits?
There’s even a tax break for you
You or your heirs can deduct interest on a limited amount of debt when the loan is repaid. If you use little or none of the money, it’s similar to paying premiums for insurance that you never need. You can prepay the loan balance without penalty whenever you like.
What’s the best payment option for me?
The New Reverse Mortgage offers a number of payment options not available in previous editions of the program. This allows you to tailor your reverse mortgage to fit your needs and retirement goals.
The Retiree’s Equity Line of Credit
The most versatile payment option is the Retiree’s Equity Line of Credit or RELOC. You can borrow the maximum amount for which you qualify during the first two years, tap the line periodically to supplement income, or hold the line in reserve. You’ll incur interest only on the outstanding balance. You can always pay as much or as little as you like to ensure this retirement safety net will be there when you need it.
Term Payment Option
A term payment will provide fixed monthly payments for a certain period. You could use it as an income bridge to, say, postpone taking Social Security until age 70, when you’ll qualify for the maximum Social Security benefit. However, if you take term payments, you don’t get any more money after the fixed period.
Tenure Payment Option
A tenure payment provides fixed monthly payments based on your age (and a life expectancy of 100), and payments continue until the last borrower dies, sells or leaves the home. The term or tenure payment will remain the same even if your loan balance grows beyond the value of your home.
Modified Term or Tenure Option
A modified term payment or modified tenure payment combines either payment type with a line of credit. This approach provides guaranteed income and flexible access to a growing line of credit. You’ll continue to receive the term or tenure payment even if you use the entire line of credit.
The Lump Sum Option
The least-flexible form of payout is a lump sum. This is a one-and-done deal. You can take part or all of your principal limit to, say, renovate your home, buy long-term-care insurance or pay the tax bill if you convert traditional IRAs to Roth IRAs.
The New Reverse Mortgage isn’t for everyone…but it could be!
How do I know if The New Reverse Mortgage is right for me?
If you’re still wondering if a Reverse Mortgage is the right solution for you but you’re not ready to sit down with one of our Reverse Mortgage Experts, then we’ll be happy to mail (or email) you Use Your Home to Stay at Home which is the official federally approved consumer booklet for those considering a reverse mortgage.
Some of this information first appeared at Kiplinger.com