Some seniors may wait to take out a reverse mortgage, however depending on your circumstances it may not be in your best interest to wait even if you do not necessarily need the money right now.
Home Equity Conversion Mortgages (HECMs), more commonly known as a reverse mortgage; allow seniors to access a portion of the equity in their home to supplement their retirement income. Eligible borrowers must be 62 or older and can choose from a variety of payment options including a lump sum, monthly payments or a line of credit. In addition, funds from a HECM loan can be used however the borrower chooses.
The line of credit option allows you to access your line of credit whenever you need it, but you’re not required to use it at any point. Assuming the borrower doesn’t take any draws; the line of credit grows and increases your borrowing power. For borrowers that don’t need the extra cash now, utilizing the line of credit option can help secure your financial future.
Another benefit to taking out a HECM loan now is that interest rates are low which allows borrowers to access more home equity. As interest rates rise, borrowers will not be able to access as much. Interest is only charged on the amount you actually borrow. For example, if you have a line of credit of $200,000, but only borrow $15,000 against the line of credit to pay for medical bills, interest is only charged on the $15,000.
A potential disadvantage to a HECM loan is when borrowers take out too much cash up front and save too little for their later years. If you don’t need the funds right away, borrowers may be best served by taking a line of credit and not using it until they absolutely need to. This gives borrowers more financial flexibility in the years to come.
The amount of loan proceeds the borrower can receive is based on the age of the youngest borrower, current interest rates and the lesser of the appraised value of the home, the sale price or the maximum lending limit.
To see how much money you may qualify for, use the reverse mortgage calculator for an estimate. All potential borrowers should speak with a trusted financial advisor to decide how a reverse mortgage loan may benefit their retirement plan. For more information about HECM loans call 800-976-6211 to speak to a reverse mortgage advisor, or scroll to the top of the page to use our reverse mortgage calculator.