It is well known that reverse mortgages do not fit everyone’s financial situation. Who are reverse mortgages for? They can be an invaluable tool for individuals who are looking to supplement their income as they age. The three circumstances below are times when seniors should strongly consider getting a reverse mortgage.
You are going to outlive your retirement savings. If you are concerned about outliving your retirement savings, a reverse mortgage can help supplement your income in two ways. First, it allows time for your retirement fund to increase in value by allowing you to live off of your home equity while your retirement account grows. Second, it shortens the length of time you will need to live off of your retirement savings by providing a secondary source of funds.
You are retiring at a time when the stock market is down. If the market is down, you don’t want to be withdrawing from your retirement funds. A reverse mortgage line of credit makes a great “emergency fund” for you to tap into while the stock market recovers. This strategy allows you to prolong the life of your retirement savings by further diversifying your investment portfolio with a reverse mortgage.
Your home value may depreciate. The real estate market has its ups and downs just like the stock market. There is a possibility that your home value could decline.1 In the 2008 market crash, this became a reality for many. A reverse mortgage prevents you from ever owing more on your home than its value. If you currently have a mortgage in your home that you may not be able to afford if the economy declines or your finances suffer a sudden change – such as large medical expenses – then consider replacing your current mortgage with a reverse mortgage as a way to protect yourself from a housing market crash. If you don’t have a mortgage, getting a reverse mortgage line of credit as an “emergency fund” is worth considering. A reverse mortgage line of credit grows over time,2 which increases your borrowing capacity, and cannot be cancelled or reduced by the lender if the housing market conditions decline.
If you are a senior homeowner in need of additional income or looking for a safety net to use in the future, a reverse mortgage may be an option for converting your home equity into the funds you need.
To learn more about how a reverse mortgage may help you extend the life of your retirement savings, contact a licensed loan advisor at 1 (800)976-6211 or click here to request a no obligation consultation to discuss your options.
1 Investopedia. The Truth About Real Estate Prices. https://www.investopedia.com/articles/mortages-real-estate/11/the-truth-about-the-real-estate-market.asp
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.