During the next two decades, approximately 10,000 Baby Boomers will turn 65 on a daily basis1. Some Boomers have been diligently planning for retirement and saving as much as possible for their golden years, while others have neglected to save enough for their retirement.
Similarly, some may have lost a significant amount in the stock market in recent years; while others may be underwater on their homes or are too deep in credit card debt to even think about adding to their savings. Sadly, 20% of all bankruptcies are now filed by people ages 55 years and older,2 which leaves very little time to bolster retirement savings without significantly postponing retirement.
For many seniors, a reverse mortgage loan can be a useful financial tool for affording retirement. A reverse mortgage loan allows seniors to access a portion of the equity in their homes to supplement their retirement income. The loans proceeds can be used for whatever the homeowner chooses.
Additionally, the loan typically doesn’t become due as long as the borrower lives in the home as their primary residence, they continue to pay required property taxes and homeowners insurance and maintain the home according to Federal Housing Administration requirements. Let’s take a look at two common situations where a reverse mortgage loan can assist financially struggling seniors to live more comfortably.
Reverse Mortgage Scenario #1 :
Robert is 63 years old and has been working full time since he was 17. He and his wife still owe $45,000 on their home and make a monthly mortgage payment of $480. A few years ago, Robert was devastated to learn that his investment portfolio had dwindled to only 30% of its prior years’ value. Robert had counted on that portfolio to get them through their retirement years, but now he’s worried he will have to continue working much longer than they had planned, just so they are able to make ends meet.
A reverse mortgage loan could be very beneficial in Robert’s situation. The proceeds from a reverse mortgage loan would be used to pay off his existing mortgage, decreasing their monthly expenses by $480, which they could use to pay other bills or use for retirement expenses. Robert will not need to repay the loan unless he moves out of the home, passes away, or fails to meet the obligations of the loan.
Reverse Mortgage Scenario #2 :
Janet is 75 years old and a recent widow. She lost her husband to stomach cancer, whose medical bills drained their retirement savings. Janet is house rich, but cash poor. The large home she and her husband raised their children in is appraised at $550,000. She owns the home outright, but is struggling to afford her utility bills and other living expenses because of the medical debt.
A reverse mortgage loan could free up the equity that Janet has in her home, and give her enough funds to pay her husband’s medical bills, and still have plenty left for everyday expenses. Janet is healthy and independent and believes she will be able to live in her home for years to come.
Retirement should be a relaxing, comfortable time in life. However, for many seniors who are financially struggling, retirement may either be postponed or requires them to significantly cut back on expenses in order to make ends meet. A reverse mortgage loan can be beneficial for seniors who have sufficient equity in their homes. With a reverse mortgage, the homeowner can choose to use the funds from the loan however they would like.
Many who choose to go this route use the funds to pay for medical bills, make home improvements, travel, or pay off existing debt. With one out of every six older Americans living below the poverty line3, a reverse mortgage loan may help many financially unstable seniors lead a more comfortable and satisfying retirement.
If you or a senior you know is struggling financially, call a reverse mortgage advisor at 866-751-6105 for more information about reverse mortgage loans, eligibility and requirements.