- Americans are currently experiencing the highest inflation rates in 40 years. The prices of food, gas, and other utilities have increased significantly, leaving older adults concerned about the potential impact inflation is going to have on their retirement funds. However, there is a unique financial tool available to help aging homeowners – the reverse mortgage loan. Reverse mortgages may offer the unexpected benefit as a retirement saver during these unpredictable times. Continue reading to find out how you can fight inflation with a reverse mortgage.
Why a Reverse Mortgage?
Reverse mortgages offer senior homeowners aged 62 years or older the opportunity to borrow money from their home’s equity. Seniors can receive their payments at fixed or adjustable rates, a line of credit, or as a lump sum. What are some of the benefits of a reverse mortgage?
- Borrower doesn’t have to make monthly mortgage payments
- The majority of the closing costs and fees associated with the reverse mortgage loan can be financed into the loan, so out-of-pocket charges are kept to a minimum.
- These loans are available at fixed and adjustable rates, the line of credit is only available through an adjustable rate, while the lump sum option is only available through the fixed rate.
Need More Reasons?
Highest Property Value in Years. Property values are one of the determinants of how much money a borrower will receive with their reverse mortgage loan.
- Higher Future Rates = Growing Line of Credit Rate. The line of credit growth rate is determined by the current interest rates as well as the MIP renewal rate and is applied to the unused line of credit. If the rates increase and you have a large line available that you have not borrowed, you are helped by the increase in rates because your credit line grows at a greater rate on the unused portion of the line.
- Line of Credit Cannot be Frozen. Unlike a traditional HELOC (Home Equity Line of Credit), a reverse mortgage line of credit provides homeowners with guaranteed access to their line of credit funds. To prevent freezing accounts, homeowners must maintain taxes, insurance payments, consider their home to be the primary residence, and not fall into bankruptcy.
- Investment Protection. A reverse mortgage allows you to choose how much of your line of credit you would like to access, and if you want to repay them early or make no payments until your house is sold.
Key Takeaways
A reverse mortgage carries numerous benefits for older homeowners. This loan provides various disbursement options that can help protect your cherished retirement funds from rising inflation. Homeowners should always consult with a trusted financial adviser to learn what option best suits their needs.
We hope that this blog was informative and helped in your decision-making process. For more information regarding reverse mortgages, please contact us.
