If you are retired or nearing retirement age, you are undoubtedly looking for ways to supplement your income to ensure it lasts a lifetime. You have also likely no shortage of advertisements for doing so. Unfortunately, many of these options are quite risky. They may entail high interest rates, balloon payments, or multiple refinancing. Horror stories of consequences like these have made many retirees wary of seeking any kind of additional assistance at all. Luckily, there is a resource at their disposal that eliminates many of the risks posed by predatory loans: the Reverse Mortgage.
The Advantages of a Reverse Mortgage
Reverse Mortgages are intended for homeowners 62+ and allow them to access the home equity they have built over the years. They are advantageous for several reasons:
- You maintain ownership of your home or property and your name stays on the title
- Repayment is not due until the termination of the loan
- You can never owe more than the value of your home
- You can choose how to receive funds (lump sum, line of credit, monthly payments, or a combination)
- They won’t likely impact your Social Security or Medicare benefits
- They have many built-in consumer protections
- Some programs, such as Home Equity Conversion Mortgages (HECMs), are insured by the U.S. Federal Government
Reverse Mortgages are helping improve the lives of millions of retirees, and you could be among them. However, if you could benefit from a loan like this, it is not prudent to wait.
Why You Should Not Wait
- The value of your home could decline. When you take out a Reverse Mortgage, the size of the loan is based on the value of your house at that current time (along with factors like the amount of accumulated equity). If you were to wait, you stand the risk of the housing market declining and your home becoming worth less, thus reducing the potential amount of your loan.
- You miss out on Line of Credit Growth. One major benefit of a Reverse Mortgage is the line of credit feature. This line of credit has a built-in growth factor that is guaranteed to you. It is also a great hedge against future depreciation of your home, as once it is set up, even if your home value decreases, the line of credit keeps growing. Studies have shown that structuring a Reverse Mortgage with a line of credit, early on in retirement, makes it much more likely your finances will last longer. Waiting means missing out on the present and future growth this line of credit would have.
- Long-term planning becomes more difficult. In order to successfully plan for the entirety of retirement, you need to be aware of all of your finances. If you plan to get a Reverse Mortgage sometime in the future but haven’t yet, you cannot effectively plan for your future and that of your children or grandchildren.
- You become vulnerable to unforeseen expenses. If you were to encounter a surprise expense such as a medical bill or essential home repair, you may not have the necessary funds available. With a Reverse Mortgage, you have a few options. You can select a lump sum and set aside a portion for expenses like these, choose a monthly payment knowing there would always be something extra each month, or you could take out a line of credit and reserve it for such emergencies.
Would you like to learn more about how a proactive Reverse Mortgage can improve your retirement? Contact Retirement Home Equity Advisors today! We are a team of licensed specialists serving senior homeowners throughout the States of Arizona, California, and Colorado. We can help you strategically leverage your home equity to decrease risk and improve financial stability throughout your retirement.
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