5 Strategies for the New Reverse Mortgage

Key Takeaways

  • Reverse mortgages allow seniors to access the home equity they have built up, and to defer payment of the loan until they die, sell or move out.
  • A reverse mortgage—technically a Home Equity Conversion Mortgage (HECM)—requires no monthly payments (just property taxes and homeowners insurance).
  • To evaluate whether a reverse mortgage is right for you or a loved one, contact us at our office: 800-480-7913 | coyle@coylefinancial.com

The Harvard University Center for Housing found that 40 percent of individuals aged 65 and over now have a mortgage—twice as many as in 1992. That’s an awful lot of people financing their homes at a time in their lives when they may have no income coming in. Would a reverse mortgage be smarter?

To qualify, you have to be at least age 62, and you can get an initial line or a lump sum up to between $300,000 and $400,000, depending on your home’s value and your age. Once you establish a base, the mortgage value can grow. The growth rates on reverse mortgages are now a little over 5 percent, so you can see your sum growing to $400,000, $500,000 or even $600,000 during your lifetime.

Even better, reverse mortgages are FHA insured. So even if we have another housing crisis and you go into a negative equity situation, there are no consequences for your estate or your family.

If you’re over age 62, here are five cash-flow building strategies to consider:

  1. Home equity line of credit. Perfect for a rainy day fund.  There’s no taxation when you take the mortgage out and no one can take it away from you. You simply let the interest accrue.
  2. Refinance your current mortgage and no longer make payments. You might be paying $1,500 a month for your mortgage, and you can just basically eliminate that by refinancing the mortgage and not making payments anymore. Essentially, this increases your cash flow. It’s a good deal.
  3. Delay Social Security. Let’s say you want to delay taking your Social Security payments until age 70 when the benefits will be much higher, but you don’t have enough nontaxable money to do so—i.e., you want to draw from your IRAs. You effectively have a home equity line of credit to get you to age 70. Then just let it run or pay it off with your higher Social Security benefits.
  4. Take out a mortgage to buy an immediate annuity. Say you take out $300,000 and you’re in your mid-70s. You can buy an immediate annuity. That may give you $2,000 to $3,000 of income monthly and you won’t have to pay the mortgage.
  5. Roth IRA conversions. If you want to convert your IRAs to a Roth but don’t have the cash on hand to pay the tax, you can use reverse mortgage proceeds to do so.

Conclusion

Certainly contact us anytime at 800-480-7913 | coyle@coylefinancial.com to see if a reverse mortgage makes sense for you or someone you care about.

Until next time, enjoy. Gary

www.coylefinancial.com
800-480-7913 | coyle@coylefinancial.com

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