In years past, reverse mortgages tended to be a last resort option for seniors who were struggling financially with no relief in sight. However, this is no longer the case as a growing number of financially stable borrowers are becoming aware that this type of loan can be used effectively to make the golden years more enjoyable. While some seniors still apply for reverse mortgages in an effort to make ends meet, these days, it’s not uncommon for many applicants to simply understand they can leverage their home equity to develop a more complete retirement plan. Although it might not be in the best interest of everyone in the older generation to take out a reverse mortgage loan, there are several situations in which it can prove beneficial if utilized properly.
Divorce affects a large percentage of the population, which the older generation is not immune from experiencing. When a senior couple decides to terminate their marriage, splitting the equity in their home can present a serious financial challenge. In cases where one spouse wishes to remain in the home, getting a reverse mortgage loan can help make this happen fairly easily. It will offer one spouse the opportunity to buy out the other spouse’s share of the equity, making it possible for them to stay while their ex-partner obtains the cash they need for a down payment on another home.
In-Home Health Care
It’s not difficult to understand why numerous senior citizens would rather go through the aging process in the comfort of their own home than move into an assisted living facility or nursing home. Unfortunately, this isn’t always an option due to the high expense of in-home health care. Even the most financially stable seniors can be burdened by medical costs. Reverse mortgages make it more feasible for the elderly to afford quality care while continuing to live in the house they’re familiar with.
Potential to Outlive Assets
Americans are living longer, which means the average length of retirement has been extended by several years. For many, this creates serious concern over the potential to outlive assets even if they have been diligent about saving. However, once homeowners realize that their biggest asset has actually been helping them build a significant nest egg over the years, they can better keep up with the rising cost of retirement. Accessing home equity through a reverse mortgage can be a financially savvy move that helps to mitigate the risk of running out of retirement income.
Buying a Home
Most seniors utilize a reverse mortgage to help them stay in their existing home, but for many in the older generation, it’s wiser to take out a reverse mortgage with the intention of downsizing. Those who qualify for a Home Equity Conversion Mortgage for Purchase can use the loan to buy a smaller, less expensive home and escape the monthly payments that come with a normal mortgage. This is a great way for the elderly to leverage their home equity to fund retirement costs and cut down on living expenses at the same time.
Seniors can also take advantage of a reverse mortgage by strategically incorporating it into their retirement plan. There are several different ways the loan can be used as a financial planning tool. For example, utilizing the funds from a reverse mortgage provides the ability to delay Social Security and pension payouts, as well as postpone drawing out retirement benefits so they may continue to grow. Additionally, it eliminates monthly mortgage payments to free up more cash and protects portfolios in a down market.
Reverse mortgage loans allow seniors to use their home equity as a powerful financial tool that provides more flexibility and protection throughout their golden years. This can turn out to be a great option for those looking to implement a more efficient retirement income strategy. As such, it has become increasingly important to consider the benefits of reverse mortgages when planning for retirement and unexpected life events.