buying a house

Reverse Mortgage: Salvaging Your Retirement With Debt

The United States is about to face a retirement crisis. A recent survey says that most Americans are not financially prepared for their twilight years. Many of them have $0 in their retirement funds while some barely have five-digit nest eggs.

Fortunately, there is hope, and it might come from an unusual source: debt. A Coloradan who is likely to retire broke but owns a house free and clear could qualify for a reverse mortgage here in Meridian, Roxborough, Stonegate, Highlands Ranch, or Sedalia.

How Does it Work?

A reverse mortgage can provide you regular income during retirement. With this product, your home equity gets converted into funds you can pocket. Although it does come with its own upfront costs, the money it supplies does not need to be repaid urgently.

As long as you stay alive and continue to live in your house you are borrowing against, you do not have to worry about repayment. If you choose an FHA reverse mortgage, you can rest assured that you will not borrow more than the value of your property.

This means that reselling your house should be enough to pay off the loan when the time comes.

How Can it Help?

Unlike in the past, a reverse mortgage is no longer a loan of last resort. It is not a product for the financially desperate anymore. You can use it as a financial planning tool strategically to beef up your retirement fund and make your wealth last as much as possible.

Qualifying for a reverse mortgage may help you afford to wait on Social Security and pension payouts to maximize what you could receive. The steady flow of income may keep you from touching your investments and keep your assets passively work for you.

When the market is down, you could stay afloat until things get better economically. Furthermore, reverse mortgage funds let you refrain from tapping your cash reserves. You could preserve your savings for rainy days and emergencies.

Most importantly, a reverse mortgage will only improve your cash flow. Since it does not have to be paid immediately, it will jack up your regular income without increasing your monthly expenditure.

What is the Catch?

mortgage concept

You can take out a reverse mortgage only if you are going to use your primary residence as collateral. You must reside in it as long as you have the loan. You may go out and take vacations, but you can’t stay away for 12 consecutive months.

If you sell your house, move, or pass away, the reverse mortgage repayment kicks in. If you must vacate your property due to a health condition and live in a medical facility for over a year, the loan has to be repaid.

Also, there is an age limit. Usually, you need to be at least 62 years old to qualify for a reverse mortgage. If you are too young to apply, you will have to wait and find other sources of extra income to prepare for your retirement.

Verdict

This financial product is definitely helpful and useful, but it can come with great risk. Mull over it before you trigger on it since a reverse mortgage may be irreversible if you make the mistake of applying inappropriately.

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