In the past, the main purpose of a Reverse Mortgage was to help seniors to fulfill cash needs by allowing them to pull the equity in their homes. But today, many seniors are finding that even if they don’t particularly need to fulfill a cash need, they can take advantage of a reverse mortgage as a tool to use strategically in retirement planning. Here are 7 ways a reverse mortgage may be used as a financial planning tool.
1. You can delay Social Security and pension payouts
Some seniors may financially need to use payouts from Social Security and pensions as soon as they are available. However, with the cash from your reverse mortgage, you may be financially sound enough to wait on receiving those payouts, thus increasing how much you receive. View an example of this strategy and the corresponding monthly benefit.
2. You can postpone drawing down retirement assets, giving assets time to grow
This idea follows the same formula as your social security and pension payouts. The longer you can delay receiving your benefits, the longer they have to grow. With a reverse mortgage, you may be able to afford to wait.
3. You can increase your cash flow by eliminating monthly mortgage payments
Every month, a monthly mortgage payment takes a chunk from your income. But with a reverse mortgage, your existing mortgage is paid off. This leaves you with extra money in your pocket that would have normally gone to paying your existing mortgage. Monthly payments are contingent on maintaining home as principal residence, paying all property taxes, and homeowner’s insurance, home maintenance and otherwise complying with loan terms.
4. You have access to a low cost growing line of credit
With a reverse mortgage, you have a growing line of credit available to you. It grows with time. This means that the line of credit available to you years from now may be larger than the line of credit available to you now.
5. You can protect your portfolio performance in a down market
In a down market, your portfolio and cash flow may not be at its peak performance. With a reverse mortgage, the incoming funds are able to protect you until the market picks back up again.
6. You can have annuity-style payments using your home’s equity
With a reverse mortgage, you are able to choose the option of receiving your funds in annuity-style payments. This is perfect for some types of people who would rather plan their income as a steady flow.
7. You can replace cash reserves
Some people have less cash in reserve than they would like. A reverse mortgage gives you the chance to catch up and replace your cash reserves, getting you up to speed financially.
These are just a few examples of how you can use a reverse mortgage as a strategic tool. With the right plan in place, you will be well on your way to a solid retirement. To check your eligibility and the amount you may qualify for, try out our online reverse mortgage loan calculator.