In the past, the main purpose of a Reverse Mortgage was to help seniors to fulfill cash needs by allowing them to pull the equity in their homes. But today, many seniors are finding that even if they don’t particularly need to fulfill a cash need, they can take advantage of the benefits of a reverse mortgage as a tool to use strategically in retirement planning. Here are 8 ways a reverse mortgage be used as a financial planning tool.
Some seniors may financially need to use payouts from Social Security and pensions as soon as they are available. However, with the tax-free cash from your reverse mortgage, you will be financially sound enough to wait on receiving those payouts, thus increasing how much you receive.
Income from a reverse mortgage is tax-free! This cannot be said for many other types of income you may earn. So it is a great advantage to be able to use your home’s equity as income, without losing a cent of it to taxes.
This idea follows the same formula as your Social Security and Pension payouts. The longer you can delay in receiving your benefits, the longer they have to grow. With a reverse mortgage, you can afford to wait.
Every month, a monthly mortgage payment takes a chunk out from your income. But with a reverse mortgage, your existing mortgage is paid off. This leaves you with extra money in your pocket that would have normally gone to paying your existing mortgage.
With a reverse mortgage, you have an ever-growing line of credit available to you. It grows with time. This means that the line of credit available to you years from now will be much larger than the line of credit available to you now.
In a down market, your portfolio and cash flow may not be at its peak performance. With a reverse mortgage, the incoming funds are able to protect you until the market picks back up again.
With a reverse mortgage, you are able to choose the option of receiving your funds in annuity-style payments. This is perfect for some types of people who would rather plan their income as a steady flow.
Some people have less cash in reserve than they would like. A reverse mortgage gives you the chance to catch up and replace your cash reserves, getting you up to speed financially.
These are just a few examples of how you can use a reverse mortgage as a strategic tool. With the right plan in place, you will be well on your way to a solid retirement.