A sharp rise in home values, combined with a shortage of single-family homes and rising rent prices, has driven up home prices around the country, leaving senior homeowners with more than $11 trillion in home equity (according to kiplinger.com). If seniors are having trouble meeting expenses and want to downsize their housing costs, there are few options that are cheaper than their current housing situation.
If you’re planning to downsize or even stay in your home, you can tap that equity and take out a reverse mortgage line of credit. Some seniors are using these loans as a financial-planning tool, so they can leverage the equity in their homes on their own terms.
If you’re over 62 and have equity in your home, you can use a reverse mortgage to pay off your underlying primary mortgage using the equity built up in the property and then borrow a portion of the remaining equity — either as a monthly payment, lump sum or line of credit that will continue to grow over time, as long as you maintain an available balance. The amount you receive is based on the current interest rates, age of the youngest borrower, and the appraised value of the home combined with the lending limits set by HUD.
“You’re not giving up the house,” says Wade Pfau, the author of a book on reverse mortgages. “If you sell and pay off the loan balance, everything left over is yours. If the loan value exceeds the sale price, you’re not on the hook to pay back more.”
There are many uses for a reverse mortgage. Some include creating more cash flow for paying every day expenses, paying off high-interest credit card debt, more cash flow to invest in the retirement lifestyle you desire, investing in home improvements to make your home safer, and/or building a medical financial plan in case you need long-term healthcare.
And we at Mortgage South want to help you see if a reverse mortgage can help you achieve retirement security. “If you have parents that are aging and worrying about bills and making ends meet, you need to sit down with Nathan and discuss the reverse mortgage options. This may be a perfect fit for you and your parents. Mortgage South is local and you deal with a professional that has been doing these since their inception. Give Nathan a call… You will not be disappointed even if you find this is not a perfect fit, he can point you in a direction that might help,” said client Rita Trammel. Call Nathan today to see how a reverse mortgage can help fill in the gap of retirement shortfall while property values are still high. (423) 624-3878.