America’s imminent retirement crisis has created a new purpose for reverse mortgage loans. Financial advisors are recognizing that the product can protect against future costs and provide income for seniors during their post-career days. It is common for retirees to find that they have not accumulated enough savings and that a significant portion of their wealth is tied up in their homes. Tapping into one’s home equity through a reverse mortgage can be very helpful in obtaining financial stability throughout retirement.
The finance industry has recently placed an increased focus on teaching financial advisors how a reverse mortgage loan could be used as part of a portfolio protection strategy.1 Below we have outlined some of these strategies.
1. Reverse Mortgage VS HELOC
Reverse mortgages offer a number of benefits that set them apart from a HELOC. Among the benefits are the credit line growth feature, no monthly principle or interest payments, and the loan is not cancelable as long as the borrower meets the obligations of the loan.2 Unlike a HELOC, reverse mortgages offer flexibility when it comes to loan repayment.
2. Refinance Existing Mortgage with a HECM
A reverse mortgage can be utilized to refinance an existing mortgage. By doing so, a borrower can eliminate their monthly mortgage payment.
3. HECM for Purchase
Although it seems to be a little known fact, HECMs can be used to buy a new home. This can provide flexibility for some homeowners because it is a way to purchase a new home using the proceeds from the product up front.
4. Defer Social Security Benefits
A 70 year old just starting to collect social security will receive benefits of about 32% higher than somebody who starts drawing from Social Security at the age of 62.1 For someone who wants to defer their social security to take advantage of this, a reverse mortgage can be useful in filling the gap and help provide financial security throughout the first few years of retirement. Specifically, term payments, or equal monthly payments for a fixed period of time, can delay Social Security benefits to maximize retirement income.
If you are considering a reverse mortgage loan and would like to learn more about the loan process and whether you’re eligible, call 866-751-6105 for more information
2You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance and maintain the home according to Federal Housing Administration requirements.