Retirement can be the turning point for many people as far as their income is concerned. As the sources to generate steady income can take a budge, extracting income from the equity in your home can be an ideal choice to consider. If you are serious about the idea, then a reverse mortgage is what you need to opt for. This loan is the way you can convert the equity built in your home over the years into a steady income leading into your retirement years, as it requires no monthly payments.
The reverse mortgage is especially designed for senior citizens over the age of 62, who are asset-rich. The lender providing them the loan then calculates the benefits that could be derived from the property based on the equity. The interest on the loan is added to the balance every month. The borrowers are allowed to defer the payment until their demise, or until they decide to move out of the home or sell it. As the borrowers can stay in the home for many years, the increasing loan balance can exceed the value of the home in due course. Once, the borrowers leave their home of any of the three reasons mentioned, the lender can recover the loan amount by selling off the estate.
While most people are skeptic about reverse mortgages, it can be an ideal way to maximize your post-retirement income. The borrowers can choose to accept the amount from the loan either as a lump sum, paid in cash or as an annuity paid in cash at regular intervals. In some cases, it can also be distributed as the line of credit.
The loan can be used as a stream of income by borrowers who reach the age of 62, and postpone their plans of claiming the Social security benefits. By delaying the claim, the citizens can have their benefits increased 6%-8% a year approximately. So, they can use the amount from the reverse mortgage to boost the income at least 7-8 years till the time they turn 70 and can claim the maximum increase in the Social Security benefits.
Also, the reverse mortgage can be an ideal funding during contingencies, especially for people who might face financial crises, and decide to pull out money from their investments. The loan can help them avoid this risk and can serve as an option to extract funds following a decline in the market. Moreover, unexpected expenses related to health such as the need for long-term care are some of the common issues once the retirement age is reached. Some citizens might also need the money to for any other emergency. The line of credit secured by a reverse mortgage can be quite useful in such circumstances.
- A reverse mortgage can be an ideal source of funds for retirees that can generate steady income from the equity of built in their home over the years.
- The mortgage loan is specially designed for senior citizens over the age of 62, who are asset-rich, yet short on cash.
- Borrowers are allowed to defer the payment until their demise, or until they decide to move out of the home or sell it. These savings can, in turn, increase their income post retirement.