Many seniors face a number of financial struggles as they approach retirement.
Retirement can be especially challenging if you face some recent financial setbacks or fail to set enough money aside for your retirement savings during your working years.
The good news is that there are some ways that you can make retirement a lot more bearable financially. If you own your home, then one option that you might want to consider is a reverse mortgage. Americans have taken out over $7 billion in reverse mortgages, which shows that they are a good option for seniors struggling in retirement.
With a reverse mortgage, a lending company will give you money equal to the equity in your home. It is different from a home equity loan though, because you don’t have to pay the loan back while you are alive. Instead, the bank will get the money from your home after you pass away or relinquish ownership of the property.
You can get a considerable amount of money from a reverse mortgage if you have a lot of equity. You can use a reverse mortgage calculator like https://reverse.mortgage/calculator to see what you might get.
There are a number of reasons that reverse mortgages can be beneficial. Some of them are listed below.
You are property rich but cash poor
Many seniors unexpectedly find themselves rich, at least on paper. They might have purchased their home before a major real estate boom that drove prices through the roof.
Unfortunately, they are often rich in name only. They would have to sell their property to benefit from the massive appreciation and value. They might still struggle to come up with the cash that they need to pay their bills regularly. In some cases, it might feel that the increase in property value is actually an inconvenience because you have to pay more on property taxes and insurance.
A reverse mortgage gives you an option to get some cash out of your property without having to sell it. You can get a lot of money with your reverse mortgage if you have a valuable house that is paid off and don’t intend on selling it in the near future.
You don’t mind paying property taxes and insurance
Property taxes can be a huge pain for many homeowners. Property taxes don’t affect everybody the same way. Some jurisdictions impose larger property taxes than others. They might also be prone to racing them on a whim due to fiscal mismanagement. If you have valuable property, then you might also be hit harder by rising property taxes.
You need to decide whether you are willing to keep paying these property taxes over time. You don’t want to take out a reverse mortgage if you are going to want to sell the house to find a place with lower property taxes or is going to stop paying the taxes altogether.
You plan on staying on your property for the rest of your life
Reverse mortgages might sound like a dream come true if you never have to pay them back. However, not everybody gets to keep their money until the day that they die.
You will need to pay back your reverse mortgage if you ever sell your home. This means that you have to make sure that you really want to live in it for the rest of your life. If you are planning on relocating because you don’t like the weather or want to be closer to your kids, then you should forgo taking out a reverse mortgage on your current property. However, you can always buy a new property outright and take out a reverse mortgage on it.
Your heirs don’t mind having a smaller inheritance
They always say that nothing in life is free. You could technically list a reverse mortgage as an exception. If you never sell your house until you die, then you technically get free money that you don’t have to pay back. However, it isn’t a free lunch overall.
The bank is going to eventually collect on the loan after you die. They will take money out of the property when the home sells which is the amount borrowed plus interest over the life of the loan. If there is remaining equity, your children or other heirs inheriting your estate will either need to sell the home and collect a smaller share of the equity or hey off the reverse mortgage before they can get the deed to the home.
You need to have a discussion with them and make sure that they are on the same page. Explain what a reverse mortgage is and make sure they understand
Become an Harlem World Insider - Sign-Up For Our Newsletter!