Dr. Wade Pfau, researcher and professor of retirement income at the American College of Financial Services says, “Used strategically, a reverse mortgage can greatly improve the sustainability of your retirement income.” Pfau further asserts that use of a reverse mortgage can be a valuable part of your overall financial plan.
By using this unique financial product, you can delay drawing social security benefits, thereby enabling a larger draw when you are ready. In this time of changing market conditions due to Covid, the proceeds from accessing your housing wealth allow you to let your retirement accounts, which have been hit hard in many cases, to recover and grow.
The proceeds from a reverse mortgage are tax-free and may be used for any purpose. For some it is a way to fund in-home health care and other services that may be needed in years to come such as help with yardwork or cleaning. The line-of-credit feature is guaranteed to grow and compound annually, and it is not affected by either the stock market or the Real Estate market. It can be converted to a monthly income stream if you desire.
Because the HECM (Home Equity Conversion Mortgage) is insured by the federal government, it is a non-recourse loan and you, your estate or your heirs can never own more than the home is worth.
There is no required mortgage payment with a reverse mortgage. Of course, you are still responsible for paying property taxes, homeowner’s insurance, HOA dues and maintaining the home.
Your heirs may refinance the home into their own names for 95% of the appraised value or the amount of the loan balance whichever is less, or they may sell the home and keep any proceeds after the reverse mortgage has been satisfied.
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