A reverse mortgage is one beneficial way for seniors to get a little extra cash in their pocket during their retirement. By definition, a reverse mortgage is a government insured program designed for homeowners age 62 and older that grants access to equity in the home and eliminates monthly mortgage payments* as long as homeowners have sufficient equity in their home. But, today many seniors are realizing that they don’t need the extra cash in their pocket to keep up with finances. Instead, they are utilizing the benefits of the reverse mortgage program as a retirement tool to use strategically when planning their retirement. Here’s a close look at some of the most common ways reverse mortgages are being used as a financial, retirement planning tool.
Delay Social Security
With the growing life expectancy these days, many seniors are in fear of outliving their assets later in their retirement. It is a fact that you can start taking out social security at the age of 62, but it has become common for seniors to delay the onset of social security for a few years to allow monthly benefit to grow. With the help of the reverse mortgage program, the proceeds can be used to supplement your income until you take those draws from social security, which will allow your assets to last deeper into your retirement.
Pay Off Outstanding Mortgage
Another useful way to make use of a reverse mortgage is to satisfy the outstanding mortgage and no longer make monthly mortgage payments.* By doing this, the hundreds or even thousands you spend a month on these payments can help grow the amount of money in your checking account.
Utilizing the Line of Credit
Furthermore, if you choose to use the line of credit option the reverse mortgage program offers, you can borrow money on your terms. One of the advantages of this feature is that the money you do not access at the time your loan closes actually increases over time. Therefore, if you suddenly have the need to borrow funds in the future, the line of credit will have grown at the interest rate that is associated with the program.
Use as a Contingency Plan for the Unexpected
Sometimes, your plans don’t always work out the way you wanted them to and your finances go south. A reverse mortgage can act as your “Plan B” when the unexpected happens, such as prolonged poor financial markets, health-related costs, or the need for home improvement.
*Homeowner is still responsible for taxes, insurance and property maintenance.