It doesn’t matter what word you use to describe today’s economy… the fact is, money has gotten tight for many seniors.
Almost every client who calls in right now is feeling the pinch, whether it’s in the cost of groceries, gas, utilities or all the other things in our life which suddenly cost more.
If you have a job or business, you have the option to work harder, charge more or get another job to help when times like these arise. However, for seniors living on a fixed income or retirement accounts, these increased costs have a significant impact.
And that’s why more and more people are asking about how a reverse mortgage can help.
How a Reverse Mortgage Works
If you are a homeowner that is age 62 or older, you may be eligible to take out what is called a Reverse Mortgage. Similar to an Equity loan but without the worry of a required Principal & Interest payment. Borrowers just have to pay their property taxes and insurance the same as a regular mortgage because they own the property.
Luckily, such a loan is only due when the last survivor, or the last non-borrowing spouse, passes away, leaves the property for over a year (possibly to relocate to a nursing home), or sells the home.
With a reverse mortgage, You have the option of taking the lump sum (limited on fixed rate), monthly payouts to supplement income, or using it as a line of credit. Any portion of your funds that is untapped will actually grow monthly, giving borrowers more borrowing power over time.
At the same time, you will only be charged loan interest on the money that you have withdrawn, which is your loan balance. Reverse mortgage proceeds, regardless of how you receive them, are tax-free, unlike using funds from IRA withdrawals (income tax) or stock sales (capital gains tax).
Put Reverse Mortgage Funds to Use
You can use these extra funds to take care of just about anything. The choice is up to you. Here are just some of the most important ways to put a reverse mortgage to work for you:
- Maintaining your Savings
You do not have to worry about depleting your savings to survive because you have another source of money through a reverse mortgage.
- Getting Rid of High Interest Debt
Repaying your high interest credit cards, loans, and your mortgage is crucial. By paying down such bills early, you eliminate the necessity of paying much more over time with added interest. This is especially true since there are no monthly principal or interest payments with a reverse mortgage.
- Having Cash for the Unexpected
Whether you are replacing a necessary high-ticket item in your home, making critical car repairs, or facing an unexpected medical crisis, you know that securing immediate money is sometimes necessary. You can always use your reverse mortgage to ensure prompt payment for life’s unfortunate surprises.
- Adding Supplemental Costs for Rising Expenses
There’s no debating that everyone’s cost of living has gone up quickly this year. None of us has a crystal ball to tell what’s coming next, which makes a reverse mortgage even more attractive to give seniors a cushion when it comes to paying for all the little things which add up quickly.
- Dealing with Rising Insurance Premiums
Earlier this year, we documented rising homeowners insurance premiums as part of what’s being called “FEMA 2.0”. This change has affected many homeowners throughout the Gulf Coast. And while the change began rolling out this year, its impact will be felt for years to come in terms of rising homeowners insurance premiums for everyone, not just seniors.
Contact Us Today
A reverse mortgage is a smart option that offers many potential benefits throughout your golden years.
If you have any questions about this subject or how it may help your clients, we’re happy to help. Don’t hesitate to contact us to learn more.