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 #9, How To Increase Your Monthly Cash Flow
According to the Social Security Administration, as of December 2014, the average retired worker drew $1,329 in monthly benefits. If two spouses collected the average monthly benefit, their annual household income from Social Security would come to about $32,000 — far below the median U.S. household income of $52,000.
If you want or need additional cash flow, a reverse mortgage should be an option to consider. It can provide additional cash flow in several different ways.
Cash flow could come from paying off your current mortgage and/or personal debt with a reverse mortgage. With those debts being paid off and no monthly mortgage payment with the reverse mortgage, you are freeing up those funds to use in other areas of your life.
Cash flow can also come in the form of monthly payments using the term or tenure options of the reverse mortgage. You have the option of setting up the reverse mortgage so the bank sends you a monthly check instead of you sending them one. The amount you will receive on a monthly basis is dependent on your age, value of your home, equity in your home and how you choose to structure the loan.
Getting a reverse mortgage with monthly payments can be structured as follows.
- Tenure – payments for as long as you live in the home.
- Term – payments for a specified term from a few months to 10 years.
- Modified Tenure – includes setting aside some of the equity as a line of credit.
- Modified term – includes setting aside some of the equity as a line of credit.
Tenure payments come with the lowest monthly payment but you will receive them for as long as you are living in the home and are following the terms of your mortgage agreement.
Term payments come with much higher monthly payments. The downside is that you will only receive these payments for a specified period of time.
Modified term and tenure options allow you to set aside a portion of your equity in a line of credit that can be used at any point in the future. I highly recommend this option if you do not have any other resources to cover unforeseen expenses.
Tenure, term and the modified options are very flexible and can be structured to fit your needs.
For example, if you qualified for a $700 monthly tenure payment, but you only need $500 a month, the loan can be set up to meet those needs. The portion of equity that would have been used to cover the extra $200 a month can be set aside in the line of credit.
Using the previous example, if things changed and you now needed the $700 a month instead of the $500, you could convert some or all of the line of credit into higher monthly payments, assuming you did not use all of the funds from the line of credit.
On the flip side of that example if for some reason you no longer needed monthly payments because you got a job, remarried or a retirement asset has replaced the need for those monthly payments, you could convert the unused portion of equity that was set aside to make payments into a line of credit.
If you have too much month and not enough cash, the reverse mortgage could help get you through the month, provide a nice cushion and even allow you to be a little more liberal with your cash flow. Give me a call today for a no cost reverse mortgage analysis.
Matt Allen 541-