Why Getting a Reverse Mortgage ASAP is A Wise Decision
A fresh view the reverse mortgages
If you experienced the 2008-9 Real Estate Correction, you know that the home equity you have can change. Home values usually go up about 3-5% a year, but as we saw, on occasion they can go down. What if there were a way senior homeowners could purchase equity insurance and protect themselves from another Real Estate Correction? Or how about putting a large portion of your home equity in a line of credit that could earn 4-6% a year, guaranteed, compound interest?
Savvy senior homeowners are doing just that. They are learning how a reverse mortgage can protect their home equity and putting a portion of their equity in a line of credit that earns interest, instead of letting it sit there and earn 0%. A reverse mortgage used to be seen as a loan of last resort, now it is being seen as a wise stewardship decision.
Do you remember when you were in your 20s? Financial Advisors told us to start investing now as we won’t get the decade of the 20s back, and we want to put the time value of money on our side. The same is true for someone in their 60s today. People often ask me, when is the best time to get a reverse mortgage? As soon as you and your home qualify is my answer. Reverse Mortgage FAQs.
Here’s an example. You have a homeowner with a $375,000 home that is free and clear. They are 62 years old and get a reverse mortgage with a $150,000 line of credit that grows at 5% a year on average. By age 70, the value of that line of credit is $221,618 which is available to them tax free. These folks realized that on a fixed income, cash flow trumps equity and want to position themselves to access their home equity tax free should (or when) they need it.
More and more the clients I am helping see a reverse mortgage as a nice safety net they are preparing for themselves as they age in place. We seek out ways to earn interest on our money and investments, now senior homeowners are doing this on their home equity. A prudent move indeed.