Are you a senior that is trying to plan for a stable retirement? There are a lot of factors that are going to come into play when determining how financially stable you will be. You might have a low level of liquid assets but also have valuable property.
It might seem like your only option is to sell the property and downsize or move to an area with a lower cost of living. However, this can be a major hassle. You need to pay for moving costs, deal with the stress of relocating and pay a commission to your real estate agent, along with any taxes made from profits on the sale of the property.
Fortunately, there are other options that you can consider. You might want to think about taking out a reverse mortgage on your property. Financial institutions have issued over one million reverse mortgages since 1990 when the government started to insure them. A number of seniors have thought that reverse mortgages would be beneficial.
There are a number of instances when it is prudent to look at reverse mortgage reviews and take out such a loan to make retirement easier. Some of them are listed below.
You have a very valuable property
Some people have bought homes and watch them appreciate dramatically over the years. Some homeowners in the Bay Area bought homes for around $240,000 in 2014 and found out they were worth $450,000 only two years later. Seniors that have owned their homes for 25 years or more could easily find out that they are technically millionaires, even if they don’t have much cash on hand.
The average homeowner over 62 can get between 50% and 55% of the equity in their home from a reverse mortgage. If you have a home that is worth $500,000, then you could easily get $250,000 in cash from it. If you put that money in T-Bills, short-term government bonds or other low risk investments, then you could easily Live comfortably even if you were lax about saving for retirement when you were younger.
You don’t intend to relocate
Before you decide to take out a reverse mortgage, you need to think about your long-term expectations. Most importantly, you need to think about where you plan on living.
One of the conditions of reverse mortgages is that you cannot relinquish ownership of your property. If you intend to sell your property, then you will be responsible for paying the balance of the loan.
You probably don’t want to take out a reverse mortgage if you are thinking about moving to Florida for warmer weather, relocating to be closer to your kids in another state, or migrating to a part of the country or world with a lower cost of living.
On the other hand, a reverse mortgage might be the perfect solution if you intend to stay where you are currently living. You probably wouldn’t be able to sell your house and find a comparable property for a lower price, which would make it impossible to get any money from selling it without downsizing. Even if you planned on downsizing, you might only get to keep a small fraction of the value of your home after buying a new one.
A reverse mortgage gives you an opportunity to collect cash from the equity of your home without ever having to move. It can be the simplest and most financially sensible decision for people that want to live where they are.
Your family won’t be resentful of having a smaller inheritance
One of the biggest benefits of a reverse mortgage is that you don’t have to pay back the loan at all while you are alive, as long as you don’t sell or lose control of the property. The lender will take the value from the estate after you pass.
However, this obviously doesn’t mean that it is technically free money. Even if you don’t have to pay it back, your inheritors will have to pay the price after you pass away.
You need to speak with your children and any other people in your will for taking out a reverse mortgage. They need to be prepared for the possibility that they will get a smaller share of the estate after the bank claims the value of the reverse mortgage.