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How a Reverse Mortgage Could Be Right for You Now, Not Later – GOBankingRates

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With many experts and investors predicting stocks to continue falling this year — eventually precipitating a bear market — and inflation continuing, many people are looking for some sort of financial safety net to hedge against what may come.

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And for some people, including savvy investors and financial planners, a reverse mortgage could be the answer.

What Is a Reverse Mortgage?

A reverse mortgage is similar to a home equity loan, with a few important differences. In both cases, the borrower taps into their home’s equity for money now. With a home equity loan, the borrower pays back the lump-sum loan through monthly mortgage payments.

With a reverse mortgage, however, the loan and interest doesn’t come due until the home’s last owner dies, sells the house, or leaves for more than one year.

Homeowners can tap into their home equity with a reverse mortgage in one of three ways:

  • As a lump sum payment.
  • Fixed monthly payments (which can often be used to fund retirement).
  • As a line-of-credit to use only when needed.

Some reverse mortgages pay interest on the untapped money in your line-of-credit, according to The New York Times.

Why Are Reverse Mortgages a New ‘Trend’ in Finance?

A reverse mortgage has traditionally been viewed as a last-resort for homeowners over 62 who are desperately in need of retirement income — and who have no other options but tapping into their home’s equity. But today, with so much uncertainty surrounding other investments (including stocks and real estate), a reverse mortgage could help anyone looking to bolster their emergency reserves, according to a recent NYT article.

The NYT shares the story of 75-year-old Marjorie Fox, a retired financial planner and a widow who took out a reverse mortgage to bolster her $150,000 cash reserve. She made the move in case she needed money “when the stock market is down and it could be an inopportune time to sell assets.”

Fox also has multiple other forms of income, including an individual retirement account, maturing bonds, Social Security benefits, and a survivor benefit afforded by her late husband’s pension. The reverse mortgage is solely a back-up plan — one which she has used for a few unexpected financial expenses so far, per the NYT.

Is a Reverse Mortgage Right For You?

A reverse mortgage can help retirees avoid withdrawing from investment accounts early in their retirement, a scenario which …….

Source: https://www.gobankingrates.com/investing/strategy/how-reverse-mortgage-could-be-right-for-you/

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