Could this be the right time for a Reverse Mortgage for you?
The Federal Reserve is taking its time with interest rate hikes, straining the finances of some homeowners 62 and older who depend on investment income. But this slow approach also offers a silver lining for many Americans 62 and older: low interest rates make it easier to generate income from a Reverse Mortgage.
When homeowners take out a reverse mortgage, they receive cash from the lender that represents a sort of advance payment on the equity in the home. The money is generally tax-free, and you can even set up the loan as an equity line of credit, drawing down only what you need.
Lower interest rates can translate into a larger benefit amount: At an interest rate of 5 percent, a 65-year-old homeowner could take out a Reverse Mortgage of up to $270,500 on a $500,000 house. When rates are 7 percent, the maximum would be just $182,000.
For many 62 and older whose home is their largest asset, the difference could be meaningful. The median net worth of householders aged 62 and over is roughly $170,000, according to Census Bureau data. But when home equity is excluded, that figure drops to roughly $27,000.
“There are a large number of households entering retirement that are not going to have sufficient resources to maintain a standard of living and pay medical bills,” said Steven Sass, program director at the Center for Retirement Research. If their “biggest source of savings is the equity in their homes, not their 401(k), and there is a way to access that equity, that seems like a good thing to do.”
With interest rates so low the closing costs for many reverse mortgages can be reduced or waved. Sun American Mortgage Company wrote the first reverse mortgage in the Southwest in 1989 and is still a leading provider for these wonderful retirement options.
No mortgage payments are ever required under this Government insured program, and, as always, the homeowner is responsible to pay the property tax and the insurance
premiums for their home. Another requirement will require homeowners to meet with a counselor before the benefit can be finalized, and many time this requirement can be conducted on the phone.
People in financial distress have used Reverse Mortgages “to kind of keep afloat,” said Sass. But now, new safeguards have been established that have lead many advisors and researchers to now recommend the Government insured Reverse Mortgage be reviewed by everyone as a potentially important financial planning tool.
Downsizing a home is physically and emotionally difficult for many older people, “and even though a lot of people talk about it, they don’t seem to do it,” said Sass. “A reverse mortgage basically lets you stay in your house.” And that’s a benefit worth looking into for us all.
Sun American has the most experienced staff in the industry to help you evaluate your needs and wants…to see how the Reverse Mortgage can apply to you in your unique set of circumstances. Please call us today for more information or to schedule a no-cost in-home visit.
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