Recognizing when a Reverse Mortgage may be a Solution

Recognizing when a Reverse Mortgage may be a solution....

Many look at the Reverse Mortgage as only a solution for senior homeowners that are low income and struggling monthly to get by. That is one problem a Reverse Mortgage can help with,  but there are many other uses that could be considered for solving problems or just as part of a financial planning tool. I will cover some different uses of the Reverse Mortgage,  but first a basic description of the Reverse Mortgage.

The Reverse Mortgage (RM)  is a financial planning tool that allows senior homeowners to stay at home and maintain a good quality of life.. It is a mortgage that has no monthly payments,  and there is minimal income and credit qualifying.  The homeowner can receive monthly payments or draw on a line of credit.. On the fixed rate option the homeowner must take all the funds up front in a lump sum. There is no set term and it's due upon the client no longer living at the home.  Technically the mortgage is due on the 150th birthday of the youngest borrower. All borrowers must be 62 or older when qualifying for the mortgage.

There is no restriction on how the funds from the RM can be used.  Here are some different uses....

* Supplementing income -  Monthly income can be set up to supplement the homeowners existing income.  This can be done for as long as the homeowner is in the property(for “life” or Tenure) or for a specific term.  The income amount will be based on a few factors... Age of borrowers (specifically,  the youngest borrower),  value of the property,  and amount of equity in the home.  

* In home care -  Many senior homeowners may need in home care whether for a few hours per day or 24/7. This can be very expensive, depleting the seniors income and savings quickly.  An RM can assist with those expenses and help extend the time the seniors can stay at home.

* Consolidate Debt -  The homeowners may have existing mortgage and consumer debt.  The RM can be utilized to consolidate this debt into one loan that has no monthly payments.  This can have a large impact on the homeowners cash flow or we should say out flow.  

* Alternative to traditional mortgage financing. -  Currently there is no income or credit qualifying for the RM.  There could be some changes to this soon.  The leniency here allows senior homeowners to qualify for the RM when they may not have qualified for traditional financing.  

* Investments -  Some seniors have used the RM to purchase investment property.  The line of credit can be used to access funds for purchase... If flipping the home,  the loan can be paid down when the property is sold.  The funds can then be used for another purchase.  If the investment is kept as a rental,  the funds used have no monthly payments.

* Supplement as needed -  Some seniors may just need funds at various times.  This could be due to unexpected expenses or maybe needing to temporarily supplement investments that are not performing.  The line of credit feature can be used to access funds as needed.

* Fun - Many seniors have utilized funds from the RM to purchase a new car,  go on trips,  take the family on vacation etc..

* Help family members -  Funds from the RM have been used to help children or grandchildren to buy a home,  purchase a car,  or other family assistance..

* Remodel the home -  Clients have used the RM to do remodels to make the home more senior friendly,  thus extending the time they can live in the home.  

These are some of the various ways a Reverse Mortgage has been utilized..Again, no restriction on how funds can be utilized, so whatever you can think of...Happy to look at numbers to see what options may be available...