For many baby boomers steadily approaching retirement, now is the time to start making financial decisions that will affect their golden years. From where they plan to live out these years to what happens to their estate after they pass, it’s imperative that these decisions be made thoughtfully.
Seniors with enough equity in their homes can refinance using a Home Equity Conversion Mortgage (HECM), commonly known as a reverse mortgage loan. While they are not intended to replace a retirement plan, when used judiciously, a reverse mortgage can be a valuable means of supplementing an existing one.
It is recommended that you think through the timing of this decision, much like a traditional refinance, as it can be costly if done at the wrong time. If you’re planning on selling your home in the next few years it likely won’t be worth it. However, a HECM for purchase can be a viable option for those choosing to sell their home with the intention of purchasing one they plan to retire in.
Benefits of a Reverse Mortgage in Retirement
- Eliminate Monthly Mortgage Payments1: Seniors can increase their monthly cash flow by eliminating their monthly payment, allowing them to focus on other financial obligations.
- Access to a Low-Cost Line of Credit2: With an adjustable rate HECM, seniors have the ability to draw from a line of credit at any time (in any amount) until the line of credit is exhausted, or let it sit and grow over time, allowing access to additional cash if the home value increases.
- Receive Funds in a Lump Sum3: With a fixed-rate HECM, seniors have the option to receive a portion of their home’s equity in a lump sum, often to pay for home improvement projects or to consolidate other debt.
- The Ability to Age in Place1: A HECM allows for seniors to age in the comfort of their homes while maintaining ownership and the title.
Interested in learning more about how to use a reverse mortgage as part of your retirement plan? Call (800) 976-6211 to speak with a licensed reverse mortgage specialist for a same-day, free no obligation loan assessment.
1 Your current mortgage(s) and any other existing liens against the property must be paid off at or before closing. You must live in the home as your primary residence, continue to pay required property taxes, homeowners insurance, and maintain the home according to FHA requirements. Failure to meet these requirements can trigger a loan default that may result in foreclosure.
2 The reverse mortgage loan balance grows at the same rate as the available line of credit. Line of credit growth occurs and is only a benefit when a portion of the line of credit is not used. The unused line of credit grows over time and more funds become available during the life of the loan.
3 The funds available to the borrower may be restricted for the first 12 months after loan closing, due to HECM reverse mortgage requirements. In addition, the borrower may need to set aside additional funds from the loan proceeds to pay for taxes and insurance. This disbursement option is only available for a fixed rate loan.