When you retire, will you have enough? What if you live well into your 90s or even 100-plus? That’s another few decades in which you will not work. Even if you planned well and saved everywhere you could, people live longer these days, and many find themselves in hot water in their Golden Years, especially if they need long-term elder care. If your home’s mortgage is in good standing and you are already retired, you may be able to take out a reverse mortgage. Here of five of its benefits.
1. Cash Access
In very basic terms, a reverse mortgage gives you instant cash access in the amount of your home’s assessed value. As if you were selling it, an appraiser will determine the property value and this money will be given to you. You can opt to have the entire amount disbursed in one lump sum, take monthly payments for a specified time, or place it in a credit line that you can access at any time. An AAG Reverse mortgage, for example, will also let you combine these options.
2. No Mortgage Payments
There’s a reason why “as if you were selling it” was in the previous paragraph. When you take out a reverse mortgage, you retain ownership of your home and its related property taxes and homeowner’s association fees (if you have them) but you don’t have to make your house payments anymore. This also gives you extra income, as your monthly mortgage payment goes away. You receive your home’s value in cash, as if you sold it, but you still get to live there without paying off a mortgage.
3. Extends Your Savings
This, naturally, extends your retirement savings, which works well for anyone who has retired, whether fully prepared or struggling. Imagine removing your mortgage payment from your monthly budget. How much money will that save you each year? When you do the math, you may find that you save enough to extend your retirement several years into your elder years, and if you invest what you would have paid each month in mortgage disbursements, you extend your savings even further.
4. Offers Free Financial Counseling
The beauty of an American Advisors Group or other reverse mortgage is you are required to attend financial counseling in order to qualify. This counseling is free, and you will learn much about how to handle your retirement income wisely and make it work for you instead of the other way around. You want to enjoy your retirement, not have to find a part-time job to make it through it, and this free benefit helps seniors gain better control over their savings and financial health.
5. Increased Value Potential
Finally, you might be wondering what happens to your home once you pass on or decide you’d like to move to that beach-front condo in Florida. For the duration of your life, you are allowed to live in your home. Once you pass away or move, the reverse mortgage lender receives ownership. It will sell your home to recoup the money it invested in it, and if your home has gained value over the years, the excess could be left to your heirs, or you will collect if you’ve decided to move out.
This sounds great but there’s one problem: You want to leave your home to your children. You can still do this with most reverse mortgages. You can designate its ownership be transferred to your kids upon your death, but they will have to pay off the reverse mortgage, so keep this mind. With a reverse mortgage, your home is the collateral, as with traditional mortgages, so if the lender can’t sell it, it will seek restitution from the next owner.
If you kids don’t want the home, even better. Either way, a reverse mortgage provides added and oftentimes much-needed income to retirees.