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The Reverse Mortgage-Fact & Fiction |
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Submitted by Collette Royal
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Planning for retirement can be a daunting task, long-term care, investments or annuities, lack of retirement income. These all lead to unnecessary frustration. A reverse mortgage could settle some of that headache. Since most seniors will have need to reduce their current spending while retired, a reverse mortgage may provide the added cushion most people feel they need even before retiring. Social Security, IRA's, 401k's, and other methods of retirement income usually provide enough for living expenses and recreational activities, but do not leave much room to improve your financial future. A Reverse Mortgage is an increasingly popular solution to access a large amount of tax-free funds to safely allocate for higher interest investments and securities.
Reverse Mortgages are federally regulated and guaranteed financial vehicles that allow someone age 62 or older, to pull out equity locked in most senior's largest asset: their home. A Reverse Mortgage will provide a percentage of the home's appraised value, up to 60%, in a variety of different payout methods, but the borrower is not required to make a single payment as long as they continue to live in the home. All repayment, closing cost, and interest are repaid when the senior either moves or the home is sold, so it produces a large amount of capital with absolutely no risk of default or foreclosure on the home.
One of the key benefits to the reverse mortgage is that the funds are completely tax-free. A reverse mortgage will also not will NOT impact social security or Medicare benefits in any way. A reverse mortgage becomes even more impactful when used as a revenue generator by increasing your investment portfolio. For example, a couple who are both age 65, with a home value of $200,000, zero mortgage, and are looking to either purchase an immediate annuity or a joint long-term care insurance policy. A reverse mortgage could potentially provide over $100,000 to fund the annuity or a single premium insurance policy, with interest growth and a long-term care rider.
The true power of the reverse mortgage as an investment tool lies in two aspects of the product. The first is that any funds generated from a reverse mortgage are completely tax free, and will not affect the tax bracket of the applicant. The problem to the senior or anyone for that matter, is that they have to remove themselves from the asset they are liquidating in order to access the proceeds. Not with a reverse mortgage! A reverse mortgage is a true win win.
A reverse mortgage lets you unlock the value of your single largest asset without having to dispose of it or pay for it in any way. As more and more seniors reach their mid to upper 60’s and 70’s, they will look to increase the dollars available to them. Once again, this is why a reverse mortgage is going to continue to be a popular financial strategy in the years to come.
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