10 Resourceful Ways to Use a Reverse Mortgage

Reverse mortgages are used by hundreds of thousands of older Americans, but this mortgage type doesn't often catch the limelight. There are a few reasons why. Most notably, reverse mortgages (also known as Home Equity Conversion Mortgages) simply aren't right for everyone, and in the past, they lacked the protections they now have built in. While there are a few drawbacks of this mortgage type, like less equity for your heirs, today's HECMs are a viable option for retirement success, they're highly regulated, and they can offer an excellent solution to cashflow problems in several situations.

Who is eligible?

Homeowners over the age of 62 who have approximately 50 percent home equity in a primary residence, or who have at least a 50 percent down payment when purchasing a new primary residence, could be eligible for a reverse mortgage. Unlike other mortgage types, a reverse mortgage has no credit or income requirements. They are also government-insured and do not require a home sale.

What can reverse mortgages be used for?

Reverse mortgages are an often-overlooked retirement funding tool. If you’re in need of greater cashflow or looking for ways to extend your retirement portfolio’s duration, here are 10 ways you can use a Home Equity Conversion Loan (AKA reverse mortgage):

1. Eliminate your monthly mortgage payment. A reverse mortgage allows you to tap into your equity without needing to repay, giving you greater monthly cashflow.
2. Extend the life of your retirement portfolio. Reduce the number of withdrawals from your retirement portfolio by using tax-free regularly scheduled payments each month from a reverse mortgage, effectively using home equity in your retirement plan.
3. Remodel your home for accessibility. Need new home features to improve your home’s livability? A reverse mortgage can help fund it and eliminate your monthly payment, allowing you to choose where you live in your retirement years.
4. Pay for long-term health care needs or maintain a line of credit (that grows) for health emergencies and surprises.
5. Cover monthly expenses while other assets with greater appreciating value grow.
6. Avoid the capital gains tax that could result from the sale of other assets, and still cover monthly expenses.
7. Maintain cash reserves. Get through the fluctuations of investment markets with greater flexibility.
8. Pay for Medicare part B or D costs.
9. Buy a new home without monthly mortgage payments and eliminate the need to use all of the proceeds from the sale of your current home.
10. Setup transportation arrangements for when you are no longer comfortable driving.

Wondering if a reverse mortgage might be right for you or a family member? Contact us today to evaluate your options.