An Innovative Way to Pay Off Your Mortgage (and Plan For Retirement)When I speak to clients for the first time, they often tell me one of the reasons they never considered a reverse mortgage is because they do not currently have a mortgage. I let them know, off the bat, that while the reverse mortgage was created as a way to help seniors pay off their mortgage, that facet of the program is only the tip of the iceberg. The reverse mortgage, while not well known for its flexibility, is one of the most flexible mortgage programs around. If a borrower has a need or simply wants to pay off their mortgage, then they can, and any left-over funds can be stored in a line of credit or can be received via monthly payments for a set amount of years or for life (as long as the borrower lives in their primary residence). However, the reverse mortgage can also be used as an innovative long-term retirement planning tool. This is the part where many borrowers and their heirs find themselves at a loss because many continue too look into the reverse mortgage (MAINLY) as a loan of last resort when it is, in fact, an innovative way to plan for your retirement and/or pay off your mortgage.
In some cases, the reverse mortgage can be used for both.For example, a borrower who is 62 with a spouse that is 65 can receive approximately 50% of their home value (this amount is partially determined by age). If their appraised home value is approximately 300k, then they can potentially receive 145k, after approximately 5k in closing costs (this is only an approximation.) If they owe 100k on their mortgage then that will be paid off first, leaving a 45k difference. Under the new reverse mortgage program, borrowers can store the difference in a line of credit that grows yearly on the unused portion. In this scenario, borrowers pay off their mortgage, save their monthly mortgage payment and have a line of credit growing for them as a Plan Z. While every scenario is different and there are multiple factors worth considering, a reverse mortgage can offer borrowers a flexible way to plan their long-term retirement. If a borrower owes nothing on their mortgage, then the proceeds of the reverse mortgage can go directly into the line of credit and utilize the program as a Plan Z. If a borrower passes away without using the line of credit, then the only cost that is repaid is closing costs. However, no one knows the future and having extra plans in place besides the more traditional retirement plans is a sure fire to make sure you outlive your money and not the other way around. In some instances, simply paying off the mortgage is enough to make retirement that much less stressful. It is all up to our client’s goals, needs and financial stability. A reverse mortgage may be just the innovative solution you have been searching for to pay off your mortgage (and plan for retirement). Interested in a reverse mortgage or simply want more information? Give PS Financial Services a call at (888) 845-6630 or via email at info@PSReverseMortgage.com.