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2018-08-14 10:56:54
Reverse Mortgage: Should You Use Your Home Equity To Get More Retirement Income?
Many Boomers today are facing an unpleasant future. Their golden years were supposed to be fun, relaxing and carefree, but now reality has set in, and they find themselves financially unprepared. Many didn’t save enough during their working years because they planned to sell their homes and live off the equity by moving to more affordable locales. The problem is that two-thirds of the average retiree’s net worth is in the form of home equity at a time when more are wanting to retire at home rather than selling and moving to Florida, Arizona or other warm climates.

Many may be tempted to explore the reverse mortgage option as a way to increase their retirement income. Doing so means the elimination of a mortgage payment, assuming payments are still being made, and the ability to receive a portion of your home's equity. Reverse mortgage recipients are then able to use the money for anything. Some may choose to blow it on a new car or motorhome, while others may wisely use it to supplement their income in retirement. Still, others may need it to pay for medical care or costly home repairs.

For divorcing couples, a reverse mortgage may allow one spouse to stay in the home while giving the other spouse funds to find a new home. A “for purchase” reverse mortgage option is also available for those interested in purchasing another retirement home. Essentially using the home equity to fund the purchase of a new home. Keep in mind that the loan will come due when the last surviving borrower either passes away, sells the home or leaves the home for more than 12 months due to illness.

 

Options for taking the Reverse Mortgage Money

How much you will be able to borrow with a reverse mortgage will depend on your age (or the age of the younger spouse), the value of your home and current mortgage rates. Assuming a five-percent interest rate, a 62-year-old borrower could potentially qualify for an initial payout of about 52% of the home’s value. This is capped by the Federal Housing Administration limit of $636,150

 
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