If you have equity in your home and are nearing retirement or if you are already retired, you may want to consider the advantages of reverse mortgages. Essentially, a reverse mortgage is a loan, but the loan is not paid back until after you die, when the home is sold. There are many ways that this can help you after you retire.
You are able to tap into the equity of your home without moving
Of course, you can always sell your home, but if you like living where you're at, you may not want to go through the process of selling your house and then looking for a new place to live. You can also take out a loan using your home's equity as collateral, but then you are burdened with monthly payments that you may not be able to afford in your retirement. A reverse mortgage is a way to take advantage of your house's worth without selling it or making monthly loan payments.
You will have more income
If you are like many other retirees, you are likely to have less income in retirement. Maybe you were not able to save as much for retirement as you had hoped, or perhaps your money simply doesn't go as far as you thought it would. A reverse mortgage can provide you with monthly payments that will augment your current income. Perhaps you have enough income in retirement, but you still don't have the money to do some of the things you would like to do. One example would be traveling. With a reverse mortgage, you can do some of these things that you found out, after you retired, were not going to be possible. And there is no reason to save up the money for a large expenditure, because reverse mortgages can be given to you in a lump sum or as a line of credit.
A reverse mortgage can be used to pay off your existing mortgage
Many people mistakenly believe they cannot get a reverse mortgage unless their home is paid off, but this is not true. Not only can you get a reverse mortgage, but you can use a portion of the proceeds to pay off your current mortgage. If you have a large amount of equity in your home and a much smaller balance on your mortgage, you can use a reverse mortgage to pay off the balance of your current mortgage. In this situation, you are eliminating a monthly expense while increasing your income. But even if you were to use the money only to pay off your mortgage, you will no longer need to make your mortgage payments in retirement.
The are many possibilities with a reverse mortgage. The more you learn about them, the more you may find that a reverse mortgage may be a good fit during your retirement years.