How a Home Equity Conversion Mortgage can Help you in Retirement
The home equity conversion loan also known as the reverse mortgage has a reputation and it’s not always good. But it should.
Many people avoid the reverse mortgage because of the myths that surround it. But there are many great things about the reverse mortgage that seniors overlook, not realizing what an important financial tool it can provide.
What is a Home Equity Conversion Loan?
Before we get into the reasons you need one, let’s briefly touch on how a reverse mortgage works.
As the name suggests, it’s a mortgage that pays you instead of vice versa. You’ve worked hard to earn the equity in your home and once you and your spouse are at least 62-years old, you can use that equity how you want.
The reverse mortgage isn’t like a traditional mortgage. You don’t make monthly payments, but you still receive the equity in the home (up to a point depending on your age). When you sell the home or your heirs do after your passing, only then is the mortgage (principal plus interest) due.
The reverse mortgage provides you with financial peace, allowing you to enjoy your golden years. If you haven’t considered a reverse mortgage in Los Angeles yet, here are the top reasons you should.
1.Give yourself a cushion
Retirement should be a time of freedom, but without a regular income, you may feel more restricted than before. When you tap into your home’s equity with a reverse mortgage, you have the money you need. You can put the money away for a rainy day if you receive monthly payouts or take the money as a line of credit and only withdraw funds when necessary.
Since reverse mortgage repayment isn’t required until you sell the home, you can enjoy the equity and pay the loan off when you sell the home.
2.You don’t need income to qualify.
If you applied for a standard home equity line of credit, you’d need to prove you can afford it. In other words, you must prove you have the income, assets, and credit score to qualify for the loan.
With a reverse mortgage, you don’t need to prove any income. You qualify based on your age and home value. The home equity conversion loan may become your income, depending on the type of payout you choose.
3.Your retirement funds may last longer.
The life expectancy of the average Californian has increased year over year. California has one of the longest life expectancies, with an average age of 81 years old. If you didn’t plan for such a long life when you saved for retirement, you may worry about running out of funds.
With a home equity conversion loan, you supplement your retirement income. Some people even stop taking retirement withdrawals and instead use the home equity until it runs out or until they are comfortable with using their retirement funds.
Just watch the Required Minimum Distributions of any tax-advantaged accounts to make sure you don’t put yourself in a sticky tax situation by delaying too much of your retirement income.
4.You can live how you want.
Your golden years should be a time you enjoy, not a time you worry about money. A reverse mortgage may provide the funds you need/want to travel or take up other hobbies during retirement.
With more time on your hands, you can fulfill your life’s dreams and cross items off your bucket list. With extra money from your home’s equity, you won’t feel like you’re splurging or feel like you have to hold back on your dreams.
5.You have a lot of high interest debt.
If you still have debt in retirement, it can feel like it’s strangling you. The high interest rates will eat up even the most carefully planned budget.
The low mortgage rates even on reverse mortgages makes it easy to get the funds to pay off the debt and free up your budget. Living on the burden of high interest debt doesn’t create the ideal retirement lifestyle. Get yourself out of it and enjoy your golden years instead.
6.A home equity conversion loan can help with medical bills.
As you age, your medical bills may increase. Even with Medicaid, there’s no guarantee you won’t have high bills to cover. Co-pays, deductibles, and medication costs add up quickly.
Using your home’s equity, you can supplement your retirement funds, allowing you to afford the necessary medical care without going further into debt.
7.You can fix up your home.
Retirement is a great time to think about fixing up your home. Why not make it a place you love to be, especially if you’ll spend more time there? Fixing it up now may help you get a higher price for it when you sell it or when your heirs sell it after you pass away.
Using your home’s equity to fix up a home is one of the best ways to invest your money. It’s like reinvesting in your home.
Are you Ready to Take out a Home Equity Conversion Loan?
If you are at least 62 years old and have no mortgage (or a small one), you may benefit from a home equity conversion loan in Los Angeles.
It’s a great way to enjoy the equity you’ve built in your home while not putting a financial burden on yourself. The older you and your spouse are when you apply for a reverse mortgage, the more money you can get out of your equity.
To learn more about maximizing your income during retirement, or how to consolidate your high interest debt, download my free book by visiting www.reversemortgagelive.com.
This is a limited time offer, so act fast and learn why and how you too can enjoy a home equity conversion loan.
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