Reverse Mortgages are not well understood by many homeowners, financial planners, investment advisors, accountants or attorneys. As a result, they do not understand that Reverse Mortgages can provide the following benefits:
- Supplement and manage retirement income and increase monthly/annual cash flow;
- Maintain and build wealth in retirement;
- Free up capital when purchasing a new home in retirement;
- Manage tax liabilities more efficiently and at a lower overall cost;
- Ability for people to remain in their home without financial fear of being forced to move;
- Provide significant benefits for surviving spouses;
- Offering a source of capital and liquidity for needs such as home improvements, healthcare costs and possibly long-term care.
The frame of reference most people have for a Reverse mortgage is from 10 to 15 years ago. Beginning in 2012 and continuing through 2018, Reverse mortgages have transformed from a product of last resort to a key component of an individual retirement income strategy. People attempt to compare a Reverse mortgage to other mortgage products when in fact they are more akin to insurance or a financial product that can provide capital and liquidity in retirement. Lastly, a Reverse mortgage can provide the peace of mind that a homeowner can remain in their current home for as long as they want.
The following are examples of how people use Reverse Mortgages as a financial planning and long-term care tool and some of the benefits they derive:
- Pay off an existing mortgage thereby eliminating the monthly principal and interest payments. This results in a monthly and annual increase in cash flow;
- Ability of surviving spouse to remain in the home indefinitely without the financial burden caused by losing half of the household income (in many cases more);
- Create a tenure or term payment to supplement income;
- Use a Reverse Mortgage to delay receiving Social Security to age 67-70 thereby increasing the monthly Social Security benefit going forward;
- Maintain a line of credit that grows for emergencies (such as medical expenses);
- Avoid capital gain tax consequences of having to sell other assets to fund retirement;
- Create and maintain financial flexibility by not being forced to liquidate investments in a market downturn;
- Ability to cover expenses so that other assets can remain invested and grow;
- Fill in gaps in retirement planning caused by lower than expected returns;
- Eliminate other debts;
- Purchase a new home without having to tie up cash that could otherwise be invested and grow over time;
- Fund health insurance and/or long-term care needs;
- Fund health/medical related needs which can enable people to live in their home longer;
- Pay for in-home care or physical therapy following an accident or other medical event;
- Re-model a home to accommodate aging limitations in order to remain in the home;
- Convert a room or basement to a living facility for an in-home caregiver;
- Assist children or other relatives through family emergencies;
- Use to fund a child’s or grandchild’s education; and
- Assist a child or grandchild with a home purchase.
If you are interested in finding out about some of the common myths and inaccuracies that circulate regarding Reverse mortgages, click on this link for another article that outlines the Myths vs. Facts of Reverse mortgages. If you have an interest in discussing Reverse mortgages, contact Wayne Tucker at 303-468-1985 or at email@example.com.