As a growing number of “Baby Boomers” turn into seniors, many look for options to supplement their retirement.
Most sources agree that the post WWII “Baby Boom” lasted from 1946 to 1964, which relates to an upswing in births during those years. In fact, by the end of the 1940’s, 32 million babies had been born, compared to 24 million during the previous decade.
Of course, those babies grew up to become part of the youth culture and movement of the 1960’s, and the “Yuppie” movement of the 1980’s. However, now anyone born in the year 1950 or before are officially at retirement age.
Combining the growing number of seniors into the population, a longer life expectancy due to modern medical efforts, along with a decline in occupation-related retirement opportunities, some who are at or near retirement age are finding themselves to be potentially short of funds to continue the quality of life to which they’ve grown accustomed.
What Is a Reverse Mortgage?
Basically, a reverse mortgage gives homeowners age 62 or older the opportunity to cash out their home’s equity without having to pay it back, as long as they continue to live on the property. With a typical loan, a borrower pays interest which is added to the total loan amount and payment. A reverse mortgage deducts the interest, and the borrower receives the difference.
Reverse Mortgage Pros
Reverse mortgages do have many positives. Of course, as a senior you may benefit from the equity in your home, which can add greatly to your overall cash flow to help with household expenses, travel, medical bills and more. Also, there is no repayment of the loan required as long as you continue to live in the home. These are non recourse loans, so the loan value will never exceed the home’s selling price. The best part is, you still hold title to your property.
Reverse Mortgage Cons
Depending on your point of view, and your needs, there are a few minor drawbacks to a reverse mortgage. First of all, like any loan, you’ll only receive a maximum of 80% of your property’s loan-to-value. Also, upon death, or should you decide to move from the property, the loan balance is due and payable. If you live in the home for the remainder of your life, your heirs are responsible for any outstanding balances due.
Finally, while reverse mortgages can be a blessing to many seniors, it is always advised to shop around to make sure you are getting the best possible terms with the lowest fees. There are some unscrupulous reverse mortgage companies who will prey on seniors, charging exorbitant fees or adding other products to the loan that are of no value to the borrower.
Is a reverse mortgage right for you?
Should you consider a reverse mortgage, or consider selling your home? This depends again on your wants, needs, and goals. Our team of highly trained, compassionate real estate professionals will help you make the best decision that’s right for you and no one else. Contact the Lichen-Hooper Team for a no obligation consultation.