Homeowners invest years and capital into building equity in their homes in hopes of establishing a sizable nest egg for retirement. Reverse mortgage loans can help retirees hatch that egg and make the equity readily available to spend. The cash flow is not endless, though, so carefully chosen strategies can ease financial burdens and increase security for decades to come.
Pay Down an Existing Mortgage
A mortgage is typically the largest monthly obligation for homeowners. Upon retirement, this obligation becomes a greater financial strain. Foreclosing and losing the home is not an option, while downsizing may result in new issues if it means moving away from convenience, family and friends. Downsizing may also lead to a loss in equity, too.
Using reverse mortgage loans on a mortgage may appear to be paying off debt with more debt, except that borrowers do not need to pay back a reverse mortgage on a monthly basis. Just like selling a mortgaged property, a reverse mortgage pays down what is owed to the first lender. Then, the borrower can use, budget, or save what equity is left over.
Update and Make Repairs
Much of a property’s value is not just in its location or land. If the interior is in desperate need of updating, home equity can help fund the remodeling project without contributing to credit card debt or monthly expenses. At the same time, updates and repairs increase the value of the home, making both the borrower and lender happier.
Supplement Monthly Income
By converting home equity into cash, homeowners can extend their finances for a longer term by relying less on other sources of income such as Social Security. Another added benefit is that loans are not taxed as income.
Save As a Line of Credit
There is much flexibility in how and when reverse mortgage loans convert equity to household funds. Borrowers can choose to pay down debts or space out payments, but they can also decide to tuck equity away as credit. Credit can then be applied to virtually any situation as future needs arise. For more information about Reverse Mortgage Loans, do not hesitate to contact Longbridge Financial, LLC, or click here for more details.
