Life expectancies are higher than they have ever been, and to support themselves through a long retirement, many people turn to products like reverse mortgages. Wondering if a reverse mortgage is right for you? Here are five signs that you may want to consider one or at least get more information.
1. You Own Your Home or Have Substantial Equity
The key requirement for a reverse mortgage is that you own your home or have substantial equity in it. In the simplest terms, a reverse mortgage is when a bank buys your home from you. The bank bases the payments on the value of your home or equity, and it structures the mortgage so that you receive equal payments for the rest of your life.
Note that if you don't want regular payments, you can opt for a reverse mortgage line of credit. Also based on the value of your home, you can use this credit line as needed.
Of course, banks have no idea how long you are going to live. To estimate that, they use actuarial tables that's the same method insurance companies use when setting up life insurance policies. If you die or need to move to a nursing home before the bank has repaid you the whole value of the home, don't worry, the extra funds all revert to you or your heirs.
2. You Are Over the Age of 62
In order to take out a reverse mortgage, you must be at least 62. Ideally, if you have a spouse, you should wait until both of you are over the age of 62. Taking out a reverse mortgage in only one spouse's name can be problematic for the other spouse if the account holder dies.
3. You Need to Boost Your Retirement Income
Because a reverse mortgage provides you with regular payments, it can be an effective way to boost your retirement income without forcing you to move out of your home or drastically change your lifestyle. Many borrowers use reverse mortgages to boost retirement savings accounts or pension income.
You can also use a reverse mortgage to delay taking social security payments. If you start taking your benefits at age 66, you receive full benefits. However, if you delay taking payments until you are 70, you receive 132% of your payments. For example, if your full payment is $1,000 per month, you will receive $1,320.
4. You Need Money for Home Repairs
In addition to using reverse mortgages to boost their incoming money, some borrowers also use reverse mortgages for specific expenses, such as remodeling their homes. For instance, if you need to make modifications because you are in a wheelchair or cataracts have affected your vision, a reverse mortgage can help to pay for those changes, while still allowing you to stay in your home.
5. You Can Afford Other Home Bills
Although a reverse mortgage can help in a lot of financial situations, it's also important to ensure that you can afford your other obligations. As a reverse mortgage holder, you remain responsible for home upkeep expenses such as repairs; you also have to cover property taxes and utility bills. Of course, you can use your reverse mortgage payments to cover some of those bills, but it's critical to ensure that all of these expenses work with your overall budget.
If you can't afford those expenses, you may want to consider downsizing and moving to a less expensive home. Surprisingly, you can also use a reverse mortgage to buy a new home. In these cases, you pay off your existing home with the reverse mortgage and you use the remaining proceeds to buy the new home.
If several of these points apply to you, contact Retirement Funding Solutions today. Thanks to our 40-plus years of experience, we can answer your questions, and we're happy to do so.