This is a fairly well-balanced article on Reverse Mortgages that is worth the read if you are a homeowner within 10 years of retirement, are in retirement, OR have parents that are retired already.
What is missing from this article (and most that I see on the subject) are two important considerations I have gleaned from working with some high-level Financial Planners and Investment Advisors over the last decade and a half:
1) In retirement, activating your home as part of a well-thought-out retirement plan will “slow the pace of redemption” (financial planning jargon for “make your investments/savings last longer”, often much longer).
This means you will have a better retirement, your investments will last longer and you will get to do more of the things you want to do throughout. You will also have a larger remaining estate at the end of your plan, or life, to pass on to your estate (children), dispelling the myth that tapping into your home equity will cause you to lose everything. (Read the study by Sacks & Sacks, two Ph.D.’s in Economics on “Reversing the Conventional Wisdom”)
2) Once you are approved and the Reverse Mortgage allows you to remain in control for the rest of your life! I cannot emphasize enough how much control this gives you in retirement especially if you are still in a spousal relationship, the protection this offers is unparalleled:
2a) Nothing else in the marketplace approves you for life,
2b) If one spouse passes away, the Reverse Mortgage simply passes to the surviving spouse with no re-qualifying, huge protection that nothing else offers in the marketplace,
2c) The two caveats are:
- That you have to keep your property taxes up to date, which you would have to do with any mortgage or home equity line of credit, and
- That you keep valid house fire insurance, which you would have to do with any mortgage or home equity line of credit
By the way, I have had so many clients who have significant assets use reverse mortgages while working with their Financial Planners and Advisors that I have lost count. Don’t think a Reverse Mortgage means you have failed in planning for retirement, in fact, the smartest homeowners understand that using all of your assets to fund retirement lowers the overall risk of having to rely on one source. Think of it as diversifying your portfolio, but during the redemption (withdrawal) phase of financial planning. Is a Reverse Mortgage for 100% of homeowners, no, but it should be for the vast majority of homeowners and it certainly should be looked at by 100% to make sure that you are making an educated decision about retirement.
You can read the full article mentioned in this blog at MoneySense.
Angela Calla is a 17-year award-winning woman of influence which sets her apart from the rest. She is without a doubt, a true expert in her field. Alongside her team, Angela passionately assists mortgage holders in acquiring the best possible mortgage. Through her presence on “The Mortgage Show” and through her best-selling book “The Mortgage Code“, Angela educates prospective home buyers by providing vital information on mortgages.
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