Reverse mortgages are financial products with strict requirements built into them. The homeowner has to be at least 62 years old. Also, they have to own their home or the remaining balance must be small enough that it can be paid off by the proceeds from the reverse mortgage.
If these requirements are met, a homeowner can pursue a reverse mortgage loan from a lender like Sun West Mortgage. The lender will pay off the balance of the mortgage (if there is one) and then pay the homeowner. There are several ways they payout can occur but the most common is a monthly payment. These payments will continue until the owner (or owners) of the house passes away. Here are some reasons to pursue this solution.
Supplement Retirement Income
One of the most common uses of a Reverse Mortgage is to supplement retirement income. Everyone knows Social Security isn’t going to last, so you can’t depend on that for retirement. Often retirement plans and 401Ks don’t provide sufficient funds for retirement. Depending on how the stock market treats you, there might not be a lot there. By pursuing this financial solution, you can increase your monthly income using the equity in your home. Many people are even able to retire early, depending on the value of their home.
If your retirement portfolio is solid, another great use of these funds is for travel. Many people want to travel but can’t afford it while they’re buying their home. For those who have always wanted to travel around Europe, see the cherry blossoms near Mt. Fuji in the spring or go on an African safari, this is a fantastic way to make those dreams become a reality.
Buy a Vacation Home
Another interesting option for using the funds from a reverse mortgage is to purchase a vacation home. Often seniors don’t live close to their kids or grandchildren. They could purchase a second home near family to allow for convenient visits. Perhaps even better is to buy a second home in an exotic location like Hawaii or Florida. While this is nice for you when you vacation, it can be an income earner when you’re not there by renting it out to other vacationers.
One last, but very important, reason to take advantage of a reverse mortgage is to gain some peace of mind. As you get older, you don’t know what your life is going to have in store for you. Any type of unexpected expense is scary when you are on a fixed income, especially during retirement. This new income stream gives you some added security.
As you reach retirement age, start considering your future. Discuss your financial situation and see if a reverse mortgage is right for you.