Fact Checking Reverse Mortgages
Did you know that April 2 was International Fact Checking Day? Since there are so many misconceptions about reverse mortgages, it seems like the ideal time to lay them to rest and discuss how reverse mortgages can be a powerful financial planning tool — especially in today’s financial climate:
Here are some common reverse mortgage myths you may have heard:
- They’re considered a last resort when you have no other options
- This type of loan takes advantage of older homeowners
In reality, many financial advisors now view reverse mortgages as a smart option to be considered when mapping out retirement investment strategies for their clients.
Financial facts you need to know
Americans have been enjoying a bull market for the last 12 years. It’s been a great run, but it won’t last forever. If you’re planning for retirement, that means you need to consider what happens if your invested assets don’t keep growing at the rate you’ve gotten used to.
For many older homeowners, a home represents your biggest asset and the majority of your net worth. A home is what’s called a “buffer asset” — one whose value isn’t directly tied to an index like the S&P 500.
If you find yourself short on cash and need to create liquidity in a down market, buffer assets should be leveraged before you cash in a retirement account or sell stock. By leaving investible assets untouched, you’re giving them time to recover at least some of their value as the market improves.
So what does the stock market have to do with reverse mortgages?
A reverse mortgage simplifies the process of tapping into the equity you’ve built in your home, which is likely your largest buffer asset.
This home-secured loan allows you to turn part of that home equity into funds you can use for any purpose, from unexpected expenses to renovations, paying for healthcare or simply the costs of daily living.
Reverse mortgage loans have some distinct advantages over traditional mortgages or lines of credit:
- No required monthly mortgage payments. You just need to stay current with loan obligations including property taxes, maintenance and insurance.
- A growing line of credit. One way to access your reverse mortgage funds is through a line of credit that’s available if and when you need it. And the best part is it grows over time*.
- Improved cash flow. If you plan to rely heavily on investments for your retirement income, funds from a reverse mortgage can help balance out your portfolio during an economic downturn.
The right strategy to fund retirement
If you’ve been keeping an eye on economic indicators, you know that inflation is increasing. Interest rates are rising in an attempt to combat inflation. And no one can accurately predict how the stock market will react in both the short and long term.
Whether you’re close to retirement, already there or planning ahead, making sure you’ll have sufficient funds means choosing wisely about how you prioritize your assets— a strategy called sequence of returns risk.
Simply stated, that means leaving interest-bearing assets untouched as long as you can, and turning to buffer assets like home equity first when you need access to cash. That’s where a reverse mortgage can help.
Check your eligibility, then reach out to Reverse Mortgage Funding LLC (RMF) at (888) 277-1567. We’ll connect you with one of our local loan specialists to answer your questions and help you determine if a reverse mortgage fits your retirement funding needs.
*If part of your loan is held in a line of credit upon which you may draw, then the unused portion of the line of credit will grow in size each month. The growth rate is equal to the sum of the interest rate plus the annual mortgage insurance premium rate being charged on your loan.
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 4.7-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.