How A Reverse Mortgage Can Improve Your Retirement Years

Thursday, November 22, 2018, 6:00 AM | Leave Comment

A reverse mortgage is a useful tool for retirement. Homeowners over the age of 62 can take out a mortgage against their house.

With this type of loan, you can have no monthly payments. The mortgage and interest are paid off when the borrower dies or when the property is sold. As a recent retiree, you may wonder how a reverse mortgage can improve your retirement years.

Well, below are five ways a reverse mortgage can work for your retirement.

  1. Delay Social Security

    A reverse mortgage can allow you to hold off on applying for social security. Waiting on drawing from social security can guarantee you more money depending on how long you live. You can choose to take social security at 62 if you really need the money or plan to invest carefully.

    However, getting a reverse mortgage can pay for your expenses now. Then, you can wait to draw from social security until the maximum age. Using a reverse mortgage like this can guarantee a maximum payout, either from social security or a pension without leaving you short of cash.

  2. Protect Your Investments

    If your retirement portfolio is dependent on investment, a reverse mortgage can help you maximize those.

    You might have relied on stock to hold up your retirement. But if the markets are not doing well, you might need more cash. Getting a reverse mortgage can give you the flexibility to wait and sell stocks at their highest. This also insures you get the most out of your retirement investments and don’t have to make decisions that’ll will financially hurt you.

    You spent many years building up these retirement savings, carefully deciding which stocks would do best. A reverse mortgage can protect all that work in the case that you retire in a bad market.

  3. Save You Taxes

    A reverse mortgage can save you money in taxes. Whether you have an IRA, a Roth IRA, or a 401(k); how you convert that into usable funds will produced a large amount of taxes and fees.

    Since reverse mortgage income isn’t taxed, you can use this income to pay these taxes and fees then keep the entirety of the fund in your retirement account. This assures you pay the absolute minimum amount on your retirement funds.

    Using financial tools, there’s a lot of ways to avoid fee pitfalls in retirement if you have a good amount of free cash around. A reverse mortgage gives you that cash buffer to get the most out of your retirement.

  4. Line of Credit

    A reserve mortgage can create a very useful line of credit. This credit can be useful covering all sorts of expenses and as a safety net in case your retirement runs out. This sort of credit line also has a lot of advantages to traditional credit.

    The credit line will grow each year as the debt associated with your house grows, giving you more of a barrier. Also, unlike equity loans, the bank can’t cancel this line of credit so long as your house is kept up and the taxes on it are paid off. This creates a certain line of money for the entire length of the reverse mortgage that you can continue to draw on in perpetuity.

    If you want to learn more about a reverse mortgage line of credit, check out the recommendations here:

  5. Builds A Bigger Inheritance For Heirs

    With a reverse mortgage, you may end up giving your heirs more money. This seems contradictory, since the bank will take your largest asset, the home itself. However, the benefit is that as long as the home’s in good repair, your line of credit keeps growing. This means even if the value of the house collapses, you keep making money.

    Your heirs may lose the house, but they are also off the hook for any debt accumulated. Meanwhile, your investments or other holdings may produce more value you didn’t use.

    In the end, there’s a very good chance your heirs will see their inheritance increase.

A reverse mortgage can improve your financial outlook in retirement. It can help you hold off social security payments till they’re at their maximum. It gives you the ability to sell investments at their best price.

The loan can help pay down taxes on your retirement fund. It can provide a line of credit that grows each year. Furthermore, a reverse mortgage protects your heirs from any debts associated with it. Using a reverse mortgage in these ways can insure you a pleasant retirement with enough money to do what you wish.

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