If you’re 62 years of age or older and own a home, you may know how a reverse mortgage loan works, but are unsure if one is right for you and your situation. Reverse mortgages aren’t for any one age group, tax bracket, or lifestyle—and they aren’t a one-size-fits-all solution. But when used correctly, there are numerous scenarios in which they can help seniors improve their quality of life and be an effective financial tool.
For most senior American couples, home equity is their greatest shared asset. In the event of a late-life divorce (also known as a silver divorce), some unique financial challenges are posed when this asset must be split. The martial home often signifies emotional security, and one spouse may want to stay in the home. Reverse mortgages can navigate this in a way that, essentially, spouse A can buy out spouse B’s share of the equity. Spouse A can continue to live in the home while spouse B has enough cash to put a down payment on another residence.
For retirees, the risk of outliving assets (also known as longevity risk) can result in a lower standard of living, inadequate health care, or even a return to employment. When these funds run out, it is likely that the retiree is further along in his or her retirement. In this case, a reverse mortgage can be a lifesaver. However, it is important to note that reverse mortgages don’t have to be seen as a last-resort solution. In fact, obtaining one early in retirement maximizes the line-of-credit’s growth potential by allowing it to compound over a longer period of time—and provides peace of mind as one enters this next chapter.
Dissatisfaction in Retirement
There are many factors that can point to retirement dissatisfaction, such as lack of planning and outliving assets. Quality of life is also important to a healthy and happy retirement, and how retirees spend their newfound free time may also come into play. A reverse mortgage loan can help seniors fund travel to visit grandkids, take a dream vacation with friends, or keep their home in the community they’ve grown to know over the past several decades.
In-Home Health Care
Many seniors prefer in-home healthcare to nursing homes or assisted living facilities. The stress of moving can take a toll on seniors, especially in addition to health issues. Taking out a reverse mortgage allows the homeowner(s) to simultaneously afford quality care while staying in the comfort of their home.
Death of a Spouse/Wage-Earner
When a spouse and wage earner passes, the surviving spouse can use a reverse mortgage to alleviate some of the financial woes during this time. If the surviving spouse is unable to make traditional mortgage payments without a dual income, a reverse mortgage lets that spouse tap into the equity of the home, without having to sell it, so that he or she can remain living there.
Whether you’re in the first phases of planning for retirement or in need of a right-now solution, understanding the benefits and scope of the reverse mortgage loan is key. With any major financial decision, always consult with an expert. “If there’s one thing I want my clients to know, it’s that I’m here to educate and give them everything they need to make an informed decision about this protected product.”