Reverse Mortgage Part of Financial Planning
~ By Jim Doyle ~
“Reverse mortgages, which let retirees tap the equity they have built up in their homes, have become a better deal in recent years. And they can be valuable as part of your overall financial plan for retirement,” says researcher Wade Pfau, author of a new book, Reverse Mortgages: How to Use Reverse Mortgages to Secure Your Retirement.
“Used strategically, a reverse mortgage can greatly improve the sustainability of your retirement income,” says Pfau, a professor of retirement income at the American College of Financial Services.
Using a reverse mortgage can allow retirees to delay drawing social security benefits, thereby enabling them to draw a larger amount when they are ready. In this time of changing market conditions, the proceeds from tapping the equity in their home allows investors to let their retirement accounts, which have been hit hard in many cases, to grow and recover.
Sometimes referred to as a “home annuity,” a reverse mortgage serves as a stable, tax-free source of funds to be used for any purpose. For some it is a path to remaining in their home by paying for the services needed to do so, such as home health care, yard work, cleaning, etc.
In many cases, the children of Boomers are homeowners themselves, and want to know that mom and dad are living a comfortable retirement while aging in place. The alternative of mom and dad scrimping and worrying about how to pay the mortgage is not appealing.
With a reverse mortgage you will never have a mortgage payment as long as you live in the home. Because it is insured by the government, you will never owe more than the home is worth, and the property may be willed to your heirs. The heirs may refinance the home into their own names for 95% of the appraised value, or may sell the home and keep any proceeds after the reverse mortgage has been satisfied.
Jim Doyle is the VP of Lending and Reverse Mortgage Specialist at Silver Leaf Mortgage in Centennial, CO. Direct: 303-875-5994, JimDoyle@SilverLeafMortgages.com NMLS# 1394377