Reverse Mortgage As A Financial Planning Tool

The use of a reverse mortgage as a tool for financial planning has become a more popular option in recent years

. Mortgages of this type allow homeowners who have reached the age of 62 to take out a loan on their primary residence and make use of those funds in any manner they choose. Since there are no limits on how those funds can be used, many seniors find that it is possible to accomplish a wide range of financial goals by entering into a reverse mortgage, making it much easier to attain their personal financial goals for the retirement years.

One common concern of many people approaching the age of 65 is that there will not be enough money to support them in an equitable manner during their retirement years. This may be because pensions turn out to not offer the return originally expected, or circumstances in previous years wiped out some of the reserves that were in place for later years. Whatever the reason, a reverse mortgage may be an ideal way to make sure the homeowner has a safe and comfortable place to live while also having money to take care of basic living expenses.

Because the terms of reverse mortgage require that the homeowner pay off any liens associated with the property, there are no worries about repossession due to failure to pay an existing mortgage or other loan where the property was used as collateral. When coupled with the fact that the terms of a reverse mortgage require that the homeowner remain in his or her home for the duration of the contract, this type of financial arrangement virtually ensures that the homeowner has a place to live throughout the retirement years. The security that comes from this knowledge can go a long way toward making sure the last years of life are more enjoyable.

Along with making it possible to arrange finances so there are no worries about losing the home, a reverse mortgage can also help to ensure there is money coming in regularly to meet the usual living expenses. By arranging for the payments from the lender to arrive in monthly installments, the homeowner effectively creates a steady revenue stream that is dependable and consistent. Using a direct deposit payment method allows the funds to automatically deposit into the bank account of choice. From there, the homeowner can use the funds to pay bills or move the money into a savings account where it can earn some interest until it is needed for some reason.

There is more than one way to receive the proceeds from a reverse mortgage. If the homeowner does not require a steady flow of revenue to handle living expenses, but does want to be prepared in the event of unanticipated expenses such as a lengthy hospital stay, going with a line of credit may be the solution. The establishment of this type of account with the lender makes it possible to access and make use of the homes equity whenever needed. As a support to pensions and other retirement plans, the line of credit goes a long way toward making sure the homeowner does not have to worry about how to deal with emergencies and other events that would otherwise exhaust the funds earmarked for retirement.

Going with a lump sum payment on a reverse mortgage can also be an effective financial strategy. This can allow the homeowner to make investments that yield some sort of return over time, without dipping into pensions and other resources that were built up during the working years. For example, the homeowner may take a portion of the lump sum and deposit it into a savings account, devote another portion to buying stocks and bonds, and use the rest to make improvements to the home that increase its market value. As a result, the net worth of the homeowner increases, and then heirs have the option of selling the home, settling the balance due on the reverse mortgage, and having access to any money remaining after settling the estate.

Because there are so many ways to utilize a reverse mortgage as an effective financial tool, homeowners should talk with financial planners before taking out the mortgage. Doing so helps to provide the homeowner with ideas on how to use the funds received to reach specific financial goals as well as increase financial security during old age. While not everyone is eligible to receive a reverse mortgage, it is well worth the time for anyone who owns a primary residence and is over the age of 62 to look into the possibilities.

by: loan123

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