Reverse mortgage loans allow senior homeowners 62 or older to access a portion of the equity in their home. In order to be eligible for a reverse mortgage borrowers must have sufficient equity in their home, live in the home as their primary residence and participate in a HUD approved counseling session.
In addition, homeowners are responsible for the upkeep of their home and are required to continue paying property taxes and insurance. If you find that you are struggling to pay your utility bills, medical bills or are even considering returning to work to help supplement your retirement income, a reverse mortgage loan may be right for you.
The median savings for people between the age of 55 and 64 is only $12,000.1 This is not a very significant amount when financial advisers estimate that the average American worker will need to save between 8 and 18 times their annual salary for retirement.2
Those numbers can be discouraging for seniors who are immediately facing retirement or who have already retired and do not have nearly that amount saved. Social Security alone may not be enough to live on, and many seniors are unable to reenter the workforce. Depending on the situation, a reverse mortgage loan may be the right option to help seniors live a more comfortable and secure retirement lifestyle.
Borrowers can choose from a variety of disbursement options including a lump sum, monthly payments or a line of credit. Whether you need the funds to help pay bills or afford a major medical expense, borrowers can use the loan proceeds however they’d like. Reverse mortgage loan funds are commonly used for:
1. Eliminating Debt If you have an existing mortgage on your home, it must be paid off with the funds from your reverse mortgage loan. Borrowers also often use the funds to pay off credit card and auto loan debt.
2. Afford Basic Living Expenses Many seniors use the reverse mortgage funds to afford basic living expenses such as food and utilities.
3. Medical Expenses As we age, we tend to require more medical care. If you have a chronic illness that requires expensive doctor visits, prescriptions or medical equipment, reverse mortgage loan funds can be beneficial in affording these costs as well.
4. Pay for In-Home Care If you are unable to do daily tasks around your home by yourself, but aren’t ready to move into a retirement community, paying for in-home care could be an option. The U.S. Department of Health and Human Services shows that the national average cost for a home health aide is $21 an hour.3
5. Live Your Dream Retirement Lifestyle You could use the loan proceeds to visit the grandchildren more often or take that once in a lifetime vacation you have always dreamt about.
6. Save for a Rainy Day Choosing to receive your reverse mortgage funds as a line of credit can be a good option for seniors who are concerned that they do not have enough saved for an emergency. A line of credit would allow seniors to tap into the equity in their home as needed.
If you are concerned about your retirement savings, you are not alone. However, before deciding if a reverse mortgage is right for you, you should discuss your financial situation with a trusted financial adviser.
For more information about reverse mortgage loans and how you may qualify, contact a reverse mortgage adviser today at 1 (800) 976-6211, or use the calculator at the top of the website.