By Matt Allen
The information provided in this article is intended to give a general overview of the topic and is not intended as legal advice. For information specific to your situation, please talk with your reverse loan mortgage professional.
Article #2, Who Should Get A Reverse Mortgage and Why?
Unfortunately, the majority of senior homeowners never consider a reverse mortgage until they face some sort of life event such as a loss of a spouse, loss of income or health issues. It is my belief, which is backed by research and case studies, most seniors can benefit greatly from getting a reverse mortgage now, even if they think they do not need one.
There are three categories of borrowers that should consider a reverse mortgage, well funded, financially constrained and underfunded. Each of these borrowers has different reasons to consider getting a reverse mortgage. For some, it is more of an insurance policy. For others, it is a lifeline for cash flow.
Well Funded – Sufficient Assets For Retirement Spending These borrowers are very strong financially, boasting 100% success rates in their portfolio. Even though these borrowers will more than likely never have a need for a reverse mortgage, they should consider one as an insurance policy against unforeseen risks such as assisted care, divorce and drastic drops in the market. However, it can be more than a contingency plan. It could provide a larger legacy through timing the withdrawal of funds when the line of credit exceeds the home’s value. It is also a hedge against falling home prices.
Financially Constrained – Just Enough / Not Quite Enough For Retirement Spending These borrowers are fairly strong financially. They have retirement assets but overall success rates in their financial plan are lower. Although these borrowers may or may not need a reverse mortgage to live comfortably during retirement. They should be working with their financial advisor to see how a reverse mortgage can be implemented in their overall financial plan. Their financial strength could be greatly increased through deferment of Social Security, spending equity first or supplementing withdrawals from their portfolio. At the very least, a line of credit should be implemented as a contingency plan to ensure funds are available when budget breakers arise and as a hedge against falling home prices.
Underfunded – Little to No Retirement Assets These borrowers typically have little to no assets other than their home. A reverse mortgage is often implemented in order for them to remain in the home, help improve their standard of living, help meet basic living needs, increase monthly cash flow and provide access to funds when large expenses arise.
There is no point in waiting to research a reverse mortgage because:
- The earlier you get a reverse mortgage, the more impact it can have on your financial situation.
- Waiting even just a couple of years could reduce the success rate of your financial plan significantly.
- You are missing out on the growth of your line of credit.
- Interest rates could go up; reducing the amount of equity you have access too.
- A variety of things could happen preventing you from qualifying in the future.
- Program and underwriting guidelines could change.
Want to learn more about reverse mortgages and how they can help you during retirement? Request my free report “10 Reasons Why Smart Senior Homeowners Are Getting Reverse Mortgages” at 541-292-5423 and ask for Kitty. Or if you have immediate questions, please ask for Matt.