Reverse mortgages are an excellent way to support a household or an individual's financial plan. It helps you reduce the monthly mortgage interest rates on your home, and it provides additional benefits.
This kind of mortgage could affect people differently; on the one hand, it could be life-changing, but on the other, it might only give a slight boost to a person's retirement plan. If you are considering reverse mortgages for you or your loved ones, here are scenarios to consider.
Persons Who Are Struggling Financially
The Reagan administration was responsible for officially creating reverse mortgages in the late 1980s. Initially, the mortgage was only for helping people struggling financially and living month-to-month. It provided monthly income payments back then, but now, reverse mortgages usually come in credit lines that allow homeowners to take funds when needed.
Also, reverse mortgages allow you to live in your primary residence until you choose to sell it. It lets you pay off your current mortgage, eliminating the required monthly mortgage payment. You would still have to pay property taxes, insurance, and other essential expenses, but the monthly payments would not be as steep. It also helps consolidate debts, and you can use your house's equity while reserving enough for you or your heirs.
Those Upgrading or Relocating to a New Home
People's needs change through life. For example, a young family needs an expansive yard and plenty of bedrooms to accommodate all the children, belongings, and pets. Mature households, though, do not need as much space. In retirement, households become low maintenance, and proximity to loved ones becomes more important than yard space and the number of bedrooms.
A home equity conversion mortgage is a great way to buy a new home. It allows you to purchase the house at approximately 50 percent down payment, with the rest kept in the bank for personal expenses. Since traditional mortgage rates today will likely increase tomorrow, an HECM helps you keep your monthly payments manageable.
Another instance you could use HECM is when upgrading to a better house. Since you have only a 50 percent down payment, you get twice the square footage for the available funds. It is a great way to make your retirement a little more comfortable.
Retirees Who Want to Be Strategic About Funds
Many people who apply for reverse mortgages are outright owners of their homes and have enough money to live comfortably during retirement. This mortgage allows them to live on or invest tax-free money, which increases their personal wealth.
Those Preparing for Emergencies
Though you cannot plan for emergencies, you can set aside funds to help yourself get through them. Life tends to be unpredictable after retirement, and people might catch curveballs from everything from health, family, and income. Setting up a reverse mortgage is a great way to have a backup plan and secure yourself against the unknown.
Those Planning for the Future
Reverse mortgage payments are also suitable for people planning for the future. Making payments on a reverse mortgage is the same as making payments on a 30-year fixed-rate variant. In reverse mortgages, you can choose to stop making payments at any time; with the growth credit line, you can withdraw payments you make down the road, as needed.
Reverse mortgages help people secure their financial future. When you get this type of mortgage, you can use it in several ways. Whether you're getting one for a home upgrade, emergencies, financial strategy, or another reason, it will definitely help with your cash flow.
Prepare for retirement and live the life you deserve when you hire Frontline Financial. We help veterans find homes with the best mortgage rates fit for their short- and long-term goals. Start an application today, or contact us to learn more!