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American Advisors Group released its 6 Ways a Reverse Mortgage Loan Can Pay Off for Your Retirement. The points are provided below.
Pay off your current mortgage. The U.S. median monthly mortgage payment is a whopping $1,609, but your new reverse mortgage would automatically pay it off. Your monthly mortgage payments would vanish, along as you maintain the condition of your home, pay property taxes, and homeowners insurance.
Reverse mortgages also provide the opportunity to pay off high-interest debt. The average credit card interest rate is 16%, while interest rates on government-insured reverse mortgages may be one third of that. Borrowers can replace one debt for another, and decide which one is worth paying off.
Borrowers can pay for age-in-place modifications. According to AAG’s Importance of Home Survey, 92% of respondents said they would prefer to live their later years in their current home. However, the United Disabilities Foundation has stated only 1% of U.S. homes are conducive to aging in place. The tax-free cash from a reverse mortgage loan can pay for a variety of home modifications to make aging in place safe and affordable.
Savvy retirees are using a reverse mortgage as a “first resort” proactive loan strategy to prevent selling investments in a down market. They can also delay taking Social Security benefits for a larger payout later, and avoid paying potential capital gains tax from the sale of their home or other assets.
Seniors can also pay for long-term care needs. Today, about 7 in 10 (69%) of people are turning 65 and will eventually need some kind of long-term care service (LTC). Because of the cost of LTC insurance policies, retirees are opening a reverse mortgage line of credit as an emergency health fund.
Reverse mortgage can help you continue to enjoy your current home or help you purchase a new home. Borrowers won’t have to pay for monthly mortgage payments, but they are still responsible for home maintenance, property taxes, and homeowners insurance.