When is a Good Time to Get a Reverse Mortgage

When is a Good Time to Get a Reverse Mortgage


“To ignore the real advantage of home equity in retirement planning is like having a winning lottery ticket and never claiming your money.”

“Retirees simply cannot continue to ignore home equity as an income source and still meet their income goals.”  Jamie Hopkins,  Retirement income program co-director of The American College of Financial Services

Executive summary: Every homeowner over 62 should look at the advantages of including a HECM (reverse mortgage) in their retirement plan, and now is the time to do it. A window of opportunity exists now that will soon begin to close. 

Have you ever said to yourself “I wish I had done that years ago!”  or “If only I had done such and such back then, things would be different now.”  I know I have. As they say, hindsight is 20/20.

This is a time like that. As it says in the Book “Now is the acceptable time.”

Here’s why:
If you have an existing mortgage

A Reverse Mortgage can eliminate an existing mortgage payment forever. The balance you can convert depends on your age and your Loan To Value (LTV). Generally, you can convert anywhere from 1% to 60% LTV. The lower the interest rate is when you apply, the higher the balance is you can convert into a reverse mortgage. As interest rates go up, the less you will be able to convert into a reverse mortgage, so by waiting you may find yourself unable to eliminate your mortgage payment. There are a number of variables that go into the calculation. We have the ability to run a proposal so you can see for yourself how it will work for you. 

But I don’t have a mortgage

If you do not have a mortgage, there are several reasons you should consider a reverse mortgage:

1) You can set up a tax-free monthly income for a specific period of years, or for life. 

2) You can set up a line of credit that  at this time has a very unique benefit. It grows each and every year….guaranteed. For example, at this time a line of credit of 100,000 will grow to around $163,000 in 10 years,$208,000 in 15 years, or $265,000 in 20 years. Right about the time you may need more money to pay for healthcare expenses, long term care costs, replace a Social Security or pension benefit due to a spouse passing, or in case you misjudged how long you would live or how much it would cost to live in retirement – all things that could easily happen.   

According to a study by Ernst & Young, a majority of Boomers will need to make a very significant reduction in retirement spending to avoid running out of money before they run out of breath. And that’s if the economy is doing OK.

3) There are also some more “advanced” uses such as paying taxes on ROTH conversions, or when the market corrects and your portfolio is down and you want to avoid taking a distribution at that time but need the income. All legitimate uses of a reverse mortgage that can benefit your retirement.
The point is, a reverse mortgage could make a big difference in your retirement lifestyle either now or down the road. How you use it depends on your situation.  

I am not saying that everybody should get a reverse mortgage, but I am saying that everyone should consider the pros and cons for their own unique situation and determine if a reverse mortgage is a good decision, because right now is the time to do it. 

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