Seniors Likely to Use Home Equity to fund Retirement with Reverse Mortgage in Coming Years

Census and aging reports indicate the population of American’s turning 65 has begun as of 2011 and will continue to skyrocket well into 2030. These baby boomers control approximately 77% of this nation’s wealth and much of this is in the form of home equity. This explosion is likely to wreak havoc on the Medicare and Medicaid Programs as many seniors’ pensions and SSI will not be sufficient to support retirement and potential long term health care cost. In the United States and Canada, homeowners over the age of sixty-two can apply for a reverse mortgage, which allows them to access a portion of their equity as tax-free income, either in the form of monthly payment or as a line of credit, or a lump sum.
Successful applicants do not have to pay back this loan until they sell the house, pass away, or move out of the property permanently for 12 month, for example into a care home for seniors. With the value of housing dropping significantly, the idea of using a reverse mortgage to supplement your retirement income might seem like absurd, but for many it can be a blessing and it can be done. However, some restrictions apply, and it is good to do your research to make sure you are eligible before starting an application.
While reverse mortgages are not the resolution for every senior they have their place as a viable financial tool and are likely to grow in popularity in the coming years.
A Few Key Points
If you already have an outstanding mortgage on your home, that sum will have to be paid off using the reverse mortgage at the time of closing with no further mortgage payments.
The most important thing to know, though, is that the house must be your primary residence, whether you own it as a single person or jointly with a spouse. For couples, the loan goes in both names based on the younger borrower, with repayment put off until both have passed away.
Reverse mortgages can help a lot for those without a large pension or other retirement income to fall back on, which could be everyone in the near future. A reverse mortgage loan actually tends to increase over time, unlike a regular home equity, which tends to shrink but may be paid off or sold at any time without penaltyr
Another benefit is the fact that you retain ownership of the house and you can pass it on to your heirs, this payoff will never exceed the appraisal or market value at the time of sale in the event of a depreciating market like we have experienced in recent years.
In the meantime, you can enjoy your senior years with that little bit of extra retirement income. But before you rush off to apply, be sure to ask about how this type of reverse mortgage can affect your other benefits, such as SSDI and Medicaid.