There are many reasons people do Reverse Mortgages but today’s article shows the most common Reverse Mortgage Scenarios.
Depending on your situation a Reverse mortgage could be an absolute life changer. Or it may just provide nominal improvement to your already solid retirement plan. For everyone doing a Reverse Mortgage the ultimate goal is to have increased financial security and a better lifestyle.
If you’re considering a Reverse Mortgage for you or someone you love these scenarios may provide additional clarity.
Reverse mortgages were officially created in the late 1980s while Ronald Reagan was President. Originally the loan had one primary purpose, to help those who struggle financially from month to month.
In the old days, the Reverse usually provided monthly income payments but nowadays monthly payments aren’t very common. The more common option is a line of credit which allows homeowners to take available funds when they want it.
Today these are the primary benefits of a Reverse Mortgage to help someone who is struggling financially:
- Allows you to pay off your current mortgage to eliminate a required monthly mortgage payment. You continue to pay basic expenses like property taxes and insurance but don’t have a heavy monthly payment.
- It could consolidate your other debts further reducing your monthly expenses.
- It allows you to live in the home for the rest of your life or until you choose to sell the home as long as you actually use the home as your primary residence and pay your property expenses.
- The new Reverse allows you to use your home’s equity but reserves enough equity in the home to likely leave a significant amount of money as an inheritance for your family.
Though some things have changed, helping those who struggle financially continues to be the most common reverse mortgage scenario.
Relocating or Upgrading:
As we grow through life our needs and wants in a home tend to change. When we’re younger with a family we need more yard and bedrooms. In retirement personal hobbies, low maintenance, and proximity to friends and family take center stage.
I live in St George Utah (https://utah.com/st-george) which happens to be a retirement community. We have a constant flow of relocating retirees coming from Northern Utah, California, and just about everywhere else in the United States.
The HECM Reverse Mortgage for Purchase is a fantastic way to purchase a new home. People who use the HECM for Purchase love the idea of no mortgage payment coupled with a down payment that is far less than the purchase price of the home.
Two common situations I see with the HECM for Purchase are:
- Buy the home with around 50% down and keep the remaining retirement money in the bank for personal living.
- Upgrade to a much better home. With roughly only a 50% down payment, you can get twice the house for the money you have available.
The HECM for Purchase is an excellent way to upgrade your retirement lifestyle.
A lot of my clients own their homes free and clear and have plenty of money to retire. Their purpose in doing a Reverse Mortgage is about strategy. They like the features of the Reverse Mortgage that allows them to access money tax-free to either live on or invest. More and more we see Multi- Millionaires doing Reverse Mortgages because it helps them protect their money. They don’t need the money but they like living a great lifestyle without having higher taxes.
Insurance against the unknown:
Another increasingly common reverse mortgage scenario is people who seem to have a solid financial future. These people have great retirement assets and income and often own a home free and clear. In this situation, the reason for doing a Reverse Mortgage is to protect against the unknown.
Life tends to become more unpredictable after retirement. Health, Family, and income are key concerns that throw us curve balls occasionally. The current state of the world is only adding to these issues. For this reason, a Reverse Mortgage can be an excellent backup plan. By setting up a Reverse Mortgage you have security against the unknown. If something happens in the stock market, housing industry, or your health a Reverse Mortgage would have the emergency funds you need to get through tough times.
Preparing for the Future:
One of my favorite scenarios for a Reverse Mortgage is those where people are planning for the future. Today they are ok making payments on a Mortgage and a Reverse Mortgage does allow you to make payments. Making payments on a Reverse Mortgage has the exact same effect as making payments on a 30 year fixed mortgage. But with a Reverse Mortgage, you can choose at any time to stop making payments and with the growth line of credit, any payments you pay can be withdrawn down the road when you need them more.
I love Reverse Mortgages!
In the years I’ve worked as a Reverse Mortgage Specialist I’ve seen people’s lives blessed and improved dramatically. It is vital that a Reverse Mortgage be set up with a true expert who can help you see how the features match your situation and goals but if you set it up right you’ll be grateful the rest of your life that you made the decision to take advantage of this amazing tool.
Call us today if you or someone you love is considering a HECM Reverse Mortgage. Call 435 359 9000