Should you consider a reverse mortgage?
January 6, 2014
by Brian Wolf

If you ask most retirees about reverse mortgages, you might get an immediate response along the lines of “that’s not for me, it’s for people in serious financial trouble.” Yet, as more boomers enter retirement without pensions, the idea of using home equity to supplement retirement income becomes more attractive.

For those of you who are unfamiliar with reverse mortgages, they are simply plans offered through federal government oversight whereby you can extract your home equity value, either via a lump sum or as an income stream (or both), and not make any payments to a bank. It’s like a bank loan using your home equity as collateral, but you make no payments and the balance is paid to the bank when the home is sold at your death.

The bank cannot ever kick you out of your home, they cannot force your children to pay back anything on the loan outside of the sales proceeds on your home after you die, and you do have the option of paying the loan off during your lifetime, but I can’t imagine many people using that option.

For millions of baby boomers who are retiring, they are facing a retirement that relies fully on social security and their savings. In many cases, they are sitting on a home that has a lot of equity, and that may be a good resource to add to their retirement planning, if set up properly. You need to be 62 years old to consider a reverse mortgage, and there are limits, of course, but newer retirees seem to be more open-minded on using this resource than their parents. But then again, their parents likely had a pension.

So, where is a good place to go to get information on these types of loans? Well, if you type in reverse mortgage into your google search engine, you will come up with over 12 million places to look; www.nu62.com is just one place you could start. If you are more studious, look at both the information-only sites, as well as the ones that can actually set them up for you.

Reverse mortgages are a lot like anything else. Used properly, they can be a terrific asset for a retiree. Used improperly, well, I’ll let you figure that one out on your own. If you have any questions on how reverse mortgages can be utilized with your financial planning, don’t hesitate to give us a call.

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