Reverse Mortgage: Emergency Fund in Retirement

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Emergency funds are just as important during retirement as when you were in the workforce.  Prior to retirement, your emergency fund was there to help if you lost your job or had another unexpected expense occur.  That doesn’t stop because you are retired.  Instead, once you stop working, there will be a shift in both what it will be used for and how you will be able to supplement it.  You will need to look at other options, besides a paycheck, if you need an infusion of cash for a potential emergency.

Are you prepared?

Building up your emergency fund can help keep you prepared and set your mind at ease if the unexpected occurs. A recent report found that 35% of older adults surveyed are focused on increasing their emergency savings.1 It is recommended to have from three to six months of living expenses in your emergency fund.  For example, if your monthly expenses are $6000 a month, you would need to have $36,000 in your emergency savings to cover six months.

A Reverse Mortgage Can Help with an Emergency Fund

A reverse mortgage loan, also known as a Home Equity Conversion Mortgage (HECM), is a Federal Housing Administration (FHA) insured loan2 allowing homeowners who are 62 years and older to access a portion of their home equity without having to make monthly mortgage payments.3 Proceeds from the loan can be received in a lump sum4, monthly payments, or as a line of credit.  With a HECM, any existing mortgage balance is paid off3 by using the proceeds from the reverse mortgage loan.

  • With a HECM, the borrower doesn’t have to make any monthly mortgage payments.3
  • HECMs are available at fixed and adjustable rates, the line of credit option is only available through an adjustable-rate loan, and the lump sum option is only available with a fixed-rate loan.
  • A line of credit gives the borrower the flexibility to use it at any time and in any amount until the line of credit is exhausted.
  • A unique feature of a reverse mortgage is the line of credit growth rate.  This means that the unused portion of the line of credit grows regardless of the home’s value.5
  • Most of the closing costs and fees associated with a reverse mortgage loan can be financed into the loan, so out-of-pocket expenses are kept to a minimum.

If you have concerns about how you would handle a large and unexpected expense and want more information about tapping into your home equity with a reverse mortgage, call 800.976.6211 to speak with a licensed loan officer.



2 As required by the Federal Housing Administration (FHA), you will be charged an initial mortgage insurance premium (MIP) at closing and, over the life of the loan, you will be charged an annual MIP based on the loan balance.

3 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

4.This disbursement option is only available for a fixed rate loan.

5 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.