Although the idea of retirement may conjure up happy thoughts of enjoying your favorite activities and freedom from a stressful workplace, it may also mean the loss of a growing salary. Your usual earnings may be replaced with a fixed income, and yet, you may still have the same existing mortgage, credit card debt, and monthly bills you have always had to pay. If you think this sounds daunting, you are not alone. In fact, according to an annual survey by the Insured Retirement Institute, 29% of baby boomers are not confident that they will have enough money saved to live comfortably throughout their entire retirement. Fortunately for homeowners over the age of 62, there is a powerful financial tool available that allows them to access a portion of home equity and help them continue to age in the comfort of their homes throughout their golden years.
Introducing the Reverse Mortgage Loan
Senior homeowners in retirement have enjoyed the benefits of reverse mortgage loans since their inception in the early 1960′s. With a reverse mortgage, borrowers eliminate house payments and can settle credit card debt. In a report by the National Council on Aging, 23% of seniors age 62-75 with debt do not believe that they will ever be able to pay it off, while 11% never expect to pay off their mortgages. However, armed with reverse mortgage proceeds, these homeowners may no longer have to worry. As long as all loan terms, such as paying property taxes and homeowners insurance are met, they may be able to enjoy the type of financial freedom that comes with their new-found increased cash flow and no monthly mortgage payments.
Why would seniors get a reverse mortgage and how has it helped?
One key feature of a reverse mortgage loan is that there are no restrictions on the borrower as to how loan proceeds may be used. This flexibility, combined with the elimination of monthly mortgage payments, helps retirees supplement their income to cover expenses that may have previously been a stretch for them. Here are some common ways reverse mortgage borrowers use their proceeds:
Pay off existing mortgage (required as part of the loan)
Settle credit card debt
Supplement income for daily expenses
Afford medical procedures or medications
Renovate, modify and repair the home
Afford in-home care
Take vacations and travel
Spend more time with friends and family
Live an independent lifestyle
For example, Dyann B. of Bradford, Pennsylvania was able to use a reverse mortgage to remain financially independent. Before she applied, the cost of her medications had increased and she was unsure if she would be able to continue paying for them. She knew she may have to ask her children for money – a burden she never imagined having to place on them. Fortunately, she learned about reverse mortgages and closed her loan with enough money to pay for her medications as well as afford repairs, updates, and maintenance on her home.
Are seniors happy they got a reverse mortgage and would they recommend it to others?
While not for everyone, a reverse mortgage loan can solve many significant financial challenges that seniors face today. This viable financial tool has earned high praise and endorsement from lenders, financial advisors, and seniors alike. Actually, 84% of borrowers from American Advisors Group, the current leading reverse mortgage lender, say their lives have improved since closing their loan. Particularly with the Home Equity Conversion Mortgage (HECM), many borrowers feel secure knowing that their reverse mortgage is government-insured, and relieved that their financial goals can be met.
For Ellen K. of Sterling, Colorado, her main goal was to pay off the $18,000 left on her existing mortgage. When her monthly expenses continued to rise, the burden of her mortgage payment prevented her from staying within budget. Finally, with her new reverse mortgage loan, she was able to pay off her existing mortgage without dipping into her other investments. Now, the freedom she feels from not having a monthly mortgage payment is something she wants others to enjoy. As such, Ellen frequently recommends reverse mortgages to other seniors.
For many borrowers in retirement, reverse mortgages may offer a number of features that make it an attractive financial option to consider. If you are contemplating this loan, make sure to conduct as much research as you can to learn about the benefits and risks. To get an even clearer understanding of its details, speak with a reverse mortgage professional from an established and credible lender. He or she can help you find out how much equity is built in your home and calculate an estimate of how much money may be available to you. With a bit of research and a strong financial plan, you just may join the thousands of senior homeowners who enjoy the financial freedom that comes with a reverse mortgage loan.
(Courtesy of Inside Elder Care...)