Reverse mortgages to finance your retirement

Reverse mortgages to finance your retirement?

Reverse mortgages to finance your retirement? A mortgage to finance your retirement sounds like eating doughnuts to lose weight. Shouldn’t retirement be the time to reap all the results for your life long hard work? Well if you have built a nice big retirement saving account, well done. However most people have not had the situation or means to plan a perfect life. Life got in the way with its various ups and downs, recessions, and college fees to pay. Your daughter’s wedding, well that got the last bit of your so-called retirement savings plan. What is more, even if you did have a nice retirement investment portfolio it is likely that the current crisis has dampened if not destroyed years of conservative investments.

However, what you might not have thought about is what is probably your most valuable (valued in dollars, that is) asset, your home. Couples nearing or in retirement often sit on a property worth hundreds of thousands of dollars while they live like paupers worrying and stressing about every services bill. Even in cases where the basic expenses are covered, couples will go for decades of the time of their life where they have more time without well deserved holidays or the odd treat.

This situation can be solved by getting a reverse mortgage. The beauty of reverse mortgages is that they are so flexible. If you are 62 or over, own your own home and have paid for it or have considerable equity (equity is the difference between the value of your home (market value) and the amount left to pay for it) on it, you are eligible.

If it is the first time you hear about these mortgages you might be surprised. This is how they work. You borrow either a lump sum, a line of credit, or receive monthly payments (nice change from PAYING monthly payments) and don’t pay a penny, cent or peso until you a) die, b) sell your home or c) leave it vacant for over 12 months (maybe due to going to a home or other care facility). The interest rates are low and banks cannot touch you until the above mentioned scenarios are completed. Even if you have to move banks will give you up to a year to make arrangements. Even if you die it does not necessarily mean that your family has to lose the home of their youth. They can refinance the home and keep it or sell it, pay for the reverse mortgage and keep the change. Of the three options detailed above the cheapest alternative is the line of credit. With this type of reverse mortgage you are given access to a pool of money you can use when and for what you want.

For obvious reasons this is not a solution or option for everyone, but if you are over 62 and have liquidity issues being able to live in your home until you “don’t need it anymore” and spend the money from its eventual sale, sounds very much like having your cake and eating it.