The Lower the Interest Rate, the Greater the Appeal of a Reverse Mortgage
Low interest rates and the growing appeal of reverse mortgages
Growing your retirement savings can be challenging — especially when interest rates are low. As rates drop, older workers may be forced to dip into investments or collect Social Security benefits earlier than planned. Those closest to retirement may need to contribute considerably more into their 401(k) to keep their savings targets on track.
But according to Dr. Wade Pfau, Professor of Retirement Income at the American College of Financial Services, there’s one financial tool that can help you profit from low interest rates, making it a smart strategy for people in or nearing retirement — a reverse mortgage loan.
Strike while the iron is hot
Thanks to historically low interest rates,* reverse mortgages gained increased attention from financial scholars and consumers alike. Says Dr. Pfau in a recent interview with Bankrate, “With retirement, low interest rates usually make everything worse. They make retirement more expensive. The reverse mortgage is the only tool I’m aware of that benefits from low interest rates.”
Available to homeowners age of 62 and older, a reverse mortgage loan allows you to draw from the equity you’ve built up in your home over the years. Unlike a traditional loan, payments are not required, so the interest rate controls how much the balance grows. The lower the interest rate, the larger the amount you can borrow.
The amount you can borrow also depends on your home’s value, as well as your age and your spouse’s age if he or she is on the loan. The older you are, the more you might be able to borrow. And when you combine that with a low interest rate environment, you’re in a good position to borrow a significant amount of money.
The growing appeal of reverse mortgages
If you rely heavily on investments for your retirement income, a reverse mortgage can provide better cash flow to help balance out your portfolio during an economic downturn. A reverse mortgage may also help you delay the collection of Social Security benefits until your full retirement age so as to maximize your monthly benefits and protect you from having to sell other investment assets to stay afloat. Consult a financial professional. Visit www.ssa.gov.
A reverse mortgage loan can play a key role in your overall savings strategy for retirement. But as with any loan, you’re required to stay current with your loan obligations, including property taxes and homeowners insurance. You’re also responsible for basic home maintenance and repairs. Keep in mind, you may pay off the loan early with no repayment fees.
Get the facts
Depending on your personal situation, a reverse mortgage can be an effective means of maintaining a comfortable retirement. If you’re considering tapping into the benefits, Reverse Mortgage Funding (RMF) can answer your questions and help weigh the risks to determine if it’s the right financial tool for you. To learn more, call (888) 277-1567 for an in-person or virtual appointment with a loan specialist in your area.
This content is sponsored by RMF, one of the nation’s leading reverse mortgage lenders. We are dedicated to helping older Americans retire more freely, in the comfort of their own homes. As a result of our commitment to providing an extraordinary and positive customer experience, we have earned a 98% customer satisfaction rating; a 4.8-star / Excellent score on Trustpilot; 4.8 out of 5 stars on LendingTree; and an A+ rating with the Better Business Bureau. Call 888-277-1567 to speak with a licensed reverse mortgage specialist to learn about our retirement financing products and solutions.
*Wichter, Zach. Super-low interest rates five reverse mortgages new appeal for older Americans. Bankrate, April 2020. https://www.bankrate.com/mortgages/low-interest-rates-add-new-appeal-to-reverse-mortgages/
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