3 Ways Reverse Mortgages Can Figure into Retirement Income

/ / Retirement, Reverse Mortgage, Tips

Reverse mortgages have fallen victim to negative perceptions for years.

It’s understandable. The early days of reverse had many of us believing that the benefit of a reverse mortgage was only for seniors who were struggling with finances and needed a quick way to get cash.

But those days are long gone.

Now, we’re seeing all the ways reverse mortgages can be used as tools – retirement income tools – backed by a solid financial wellness strategy.

In ideal scenarios, these tools can help seniors age in place more comfortably (and safely) and enjoy the fruits of their retirement lifestyle the way they always dreamed.

Read on to learn 3 ways reverse mortgages can be smart investment tools for your clients or loved ones later in life.

#1. Reverse Mortgages Reduce Strain in Investments

The shaky stability on investments in recent years has uncovered a new, practical way to use a reverse mortgage. In market declines, using income from a reverse mortgage helps reduce strain on healthy investment portfolios by offering an alternative source of retirement spending. This reduces or even eliminates the risk of having to sell assets at a loss in a downturn situation. It’s a sound strategy many clients are opting for post-COVID.

#2. Reverse Mortgages Protect Against Decline in Home Value

As we watch the post-pandemic housing market heat up – home values inching higher & inventory lower – we know, we’ll see a drop in values eventually. Whether that happens months or years from now, that’s generally how it goes.

The good news for reverse mortgage borrowers? 

The reverse borrowing limit over the life of the loan, known as the Principal Limit Factor, is not tied to the home’s actual market value. It’s tied to a borrower’s age and the loan’s interest rate. 

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Moreover, reverse mortgages are considered ‘non-recourse’ loans. The home is used as collateral and if the home cannot sell for enough to repay the mortgage, the lender cannot seek out the borrower or their estate for additional compensation. There’s built-in protection against a decline in home value.

#3. Reverse Mortgages Help You Stay Financially Comfortable & Age in Place Longer

As we’ve seen post-COVID, seniors are part of a group more susceptible to complications from COVID infections. This is leading many seniors to stay in their homes longer, receiving care at home versus downsizing and moving into retirement communities, nursing homes, or assisted living communities.

Reverse mortgages have proven to be a useful tool to help these seniors draw income to pay for long-term care at home and even make renovations to help them age in place more comfortably and safely.

Considering a Reverse Mortgage? Reach Out and Let’s Discuss If It’s Right For You

Reverse mortgages aren’t for everyone and it’s important to discuss your financial situation with a Certified Reverse Mortgage Professional before making any decisions. I’m Alison Calamia, Certified Reverse Mortgage Professional, and I’d love to help you determine if a reverse mortgage is the ideal tool for you (or your client!) when moving into retirement.