Could A Reverse Mortgage Mitigate the Risk of Economic Uncertainty?

Author

Mutual of Omaha- Reverse Mortgage Specialist- David Edel

Posted on

Aug 29, 2022

Book/Edition

Florida - Southwest

Could a Reverse Mortgage Mitigate the Risks of Economic Uncertainty?

Risks that could impact your retirement.  And could a reverse mortgage be a perfect risk mitigant for these hazards?

There are many risks that could impact retirement.  For example, the risk of outliving one’s assets, the inflation risk that erodes buying power, market risk where nest egg values decrease, and liquidity risk where there is an excess ratio of wealth concentrated in an illiquid, indivisible asset such as real estate just to name a few.

So, what exactly is a reverse mortgage?  It is an FHA mortgage that doesn’t have any payment schedule except for the sale of the home or the death of the borrowers.  It is a way to convert a portion of the home’s value into tax-free cash without any obligation on the part of the homeowners to ever make a mortgage payment.

There are myths about reverse mortgages that still abound like the myth that the bank owns or takes your home or the myth that the wisest strategy is to wait to take out a reverse mortgage as a last resort.  Retirement research confirms waiting until portfolio depletion to initiate a reverse mortgage is a dangerous way to rely on home equity.  In doing so, you would lose the compounding growth in the line of credit and/or use too much of your portfolio on fixed expenses in market downturns.

Who qualifies?

There are few requirements for a reverse mortgage.  The program was designed for homeowners aged 62 and over who own and live in the home as their primary residence.  There are also certain credit and income requirements.  Property taxes and homeowner’s insurance remain the homeowner’s responsibility.

How much money could I receive?

The amount of money you receive depends on your age (or the age of your spouse), the value of your home, and current interest rates.

What are my payment options?

Depending on the program you choose, you determine how you receive your money.  Your personal plan may include:

  • A monthly payment for as long as the home remains your primary residence
  • A lump-sum payment paid at closing
  • A growing, compounding line of credit
  • Or a combination of the three

David Edel has been a Reverse Mortgage Loan Officer since 2006.  He is employed by Mutual of Omaha. NMLS# 634160.  Feel free to contact him at 239-596-4700 for a no cost, no obligation consultation.       

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