Some retirees may find themselves not having enough savings and a significant portion of their wealth is tied up in their homes. Tapping into one’s home equity through a reverse mortgage can help obtain financial stability throughout retirement. Below are a few strategies on how a reverse mortgage loan can be used as part of your retirement plan.
Reverse Mortgage VS HELOC
Reverse mortgages have benefits that set them apart from a HELOC. Benefits include having a credit line growth feature, no monthly principal or interest payments, and the loan cannot be canceled providing the borrower meets the obligations of the loan.1 Unlike a HELOC, reverse mortgages offer flexibility when it comes to loan repayment.
Refinance Existing Mortgage with a HECM
A reverse mortgage can be used to refinance an existing mortgage and by doing so, the borrower can eliminate their monthly mortgage payment.
HECM for Purchase
HECMs can be used to buy a new home by using the equity from the sale of a previous residence to buy the next primary home in one transaction by only make one initial investment (down payment) towards the purchase. It can provide flexibility for some homeowners to purchase a new home using the proceeds from the product upfront.
Defer Social Security Benefits
A 70-year-old who just started collecting social security will receive benefits 77% higher than somebody who starts drawing from Social Security at the age of 62.2 A reverse mortgage can be useful for filling in the gaps and help provide financial security during the first few years of retirement if someone wants to defer their social security. Specifically, term payments, or equal monthly payments for a fixed period, 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 if you’re eligible, call (800) 976-6211 for more information.
1You 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.