Financial Freedom With A Reverse Mortgage
You have hit retirement, but after a few years of gliding around the country’s golf courses, hacking your way to infamy, you realize that you and your retiree wife have precious little chance of achieving financial freedom as the money continues to dry up; only a good friend of yours suggests taking a look at a Reverse Mortgage.
“It helped me!” He assures you, and urges you to investigate. “It just might solve some of your money worries.” You head for the 19th hole and ponder his advice some more.
The scenario you are facing is sadly all too common. Many people your age signed-up to the social contract: work hard all of your life, raise a family, pay your taxes, make sure you’re a law-abiding citizen, and the state will look after you in old age. You thought you’d get access to a livable pension, healthcare when you need it, and dignity in the last chapter of your earthly existence.
Now you’re finding that AFTER you have fulfilled your end of the bargain the social contract that everyone your age signed-up to has been TORN-UP. Of course, this doesn’t hit you until you’re on that golf course playing a game with your buddies and you’re wondering how you will find the $30,000 you need to have that hip replaced the doctor tells you, you need now.
If you go on the public waiting list you will be operated on sometime in the next 4000 years. They can’t exactly tell you when; mostly because you will almost certainly die before the doctor gets the scalpel anywhere near you. Can you cope with the pain you suffer already? What about waiting the rest of your life with the condition probably getting worse?
You decide you must do something. It’s not just the operation. You have other bills. It just seems to keep coming. And everything seems to be getting so expensive.
So, what is a Reverse Mortgage and how can it possibly help you?
Reverse Mortgages have become popular in recent years, and it is not hard to understand why.
Typically, if you are like many retirees all around the country, you have worked hard (probably since you were 15), paid your taxes, and may have paid-off your home (or be very close to it). The house you are in now is likely the same house you raised your children in; though it probably looks different from when you first moved in thanks to the extensions and renovations you’ve carried out over the years.
You likely have a ton of money sitting there locked-up in the value of your home. It is definitely worth more than when you first bought it, and when you find out more about reverse mortgages, you realize that you can have some or all of that equity turned into cash without needing to pay it back in your lifetime. The repayment will be made after the last person on the deeds passes away or moves house.
It’s not going to be your problem. Repayment will be made from your estate.
With a normal home loan you are given the money by your financial institution to buy the house you would like and can be approved for, and you pay interest and principal out of your income until it is paid-off when you are old. A Reverse Mortgage works totally differently.
The Difference with a Reverse Mortgage
Firstly, your home is assessed for its market value. This won’t be the amount you receive in cash, it is only a valuation. The financial institution will approve you for a percentage of the total value. Next they take closing costs out of the funds they give you, plus any taxes the government charges on this kind of loan. The balance they deposit in your bank account.
You are then free to use the funds for the needs you face every day – including that operation you need for your hip.
As you don’t make payment until you die or move out of the home, the interest continues to compound until the financial institution takes the home and sells it after you have breathed your last breath. Though this may upset your children, who may have hoped to use an inheritance to place a down-payment on their own real estate, or to put towards a Himalayan Yak farming investment some lunatic on YouTube convinced them was a sure thing.
Reverse Mortgages make sense for a few different reasons. Firstly, if the children are grown-up and moved out – as they likely are – it is very likely you have over-capitalized your living arrangements. Your home is bigger than you need, but still performs better in the real estate market than one bedroom apartments. So, extracting that capital via a Reverse Mortgage and using it for your needs makes perfect sense.
Secondly, is there any other way you are likely able to earn an income. For many who have reached retirement age it is almost impossible to find work. Health and mobility may be a problem in this regard. You could also find it difficult to have an employer take you on because of rampant age discrimination in the workplace. We like to think it doesn’t happen; that laws are in place to stop that. But it does happen, and it’s not your fault.
Why put yourself through that?! Accessing your home equity may just top-up your retirement savings enough to give you all that you need.
Also, why leave it for the kids to fight over? An old saying goes, “Where there’s a will there’s a relative.” It can be sickening to see family torn apart through fighting over deceased estates. Lawyers are more than happy to see most of the value of your estate eaten up through fees your kids will pay as they slug it out in court to try and get more than you told them they would be receiving.
You can avoid that by using your home equity for your present needs via a Reverse Mortgage.
Before deciding to use a Reverse Mortgage make sure you see your financial planner. They can take you through the pros and cons; as well as help you set a plan for your life should you be approved for a Reverse Mortgage. Also take time to let your family know what you are doing and why. They will probably see the reason and logic behind taking this step when you explain it.
After all, they wouldn’t want you to be in pain for the rest of your life waiting to have a hip replacement!
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Financial Freedom With A Reverse Mortgage - How Can Using A Reverse Mortgage Help You A Little Better?