Did you know you can use your home to help pay for your
retirement needs? For many seniors their house is their biggest
asset. If you’re at least 62 years old and own your own home, you
can use a reverse mortgage to convert this asset into much-needed
cash.
Did you know you can use your home to help pay for your retirement needs? For many seniors their house is their biggest asset. If you’re at least 62 years old and own your own home, you can use a reverse mortgage to convert this asset into much-needed cash.
With a reverse mortgage, the lender makes loan advances to you which don’t have to be repaid until your death. Repayment of the loan and accrued interest would also come due if you sell the house or move, but you won’t have to repay more than your home is worth. Depending on the type of reverse mortgage you apply for, the proceeds may be taken out in a lump-sum, in monthly payments, or made available as needed through a line of credit.
The amount of the loan you’ll be eligible for depends on several factors, including interest rates, your age, and your home’s value. Today’s low interest rate environment means that higher loans are available now than in the past. The older you are, the less accrued interest is likely to build up while the loan is outstanding, so the lender can grant a higher loan. Finally, the more your home is worth, the more the potential loan can be.
The main drawbacks to reverse mortgages include the relatively high loan costs (up to 11% in some cases) and the effect they might have on your estate plans. Your beneficiaries will have to either sell your home to repay the loan or come up with the money from other sources.
Reverse mortgages can be a key resource in paying for in-home long-term care costs, home upkeep, and other retirement needs. Please call us if you would like additional information or assistance with your retirement planning.
Bob Bianchi is a partner with the accounting and business consulting firm of Bianchi, Lorincz & Company located in downtown Hollister.
