Making ends meet in retirement can be downright challenging. Even when you do feel prepared, an unexpected health issue or surprise home repair can sometimes throw you off course. And now, Social Security benefits may not be enough retirement income to support your lifestyle.
So how can retirees generate more income for the type of retirement they desire?
One strategy may be the reverse mortgage.
What is a Reverse Mortgage?
As the name suggests, a reverse mortgage is the opposite of a traditional home mortgage. Instead of paying down a loan to build equity in your home, you use the equity in your home to receive money.
Not everyone qualifies for a reverse mortgage, but if you do you may choose to receive the funds in a lump sum, in a series of payments, or you may treat it as a line of credit and only take the money out when you need it.
It’s probably becoming pretty clear how this can help you generate additional retirement income. Instead of relying on your Social Security benefits or using up your retirement accounts, you may be able to leverage your home equity for a reliable stream of income.
Reap the Benefits and Know the Risks
With a reverse mortgage, you only pay back the loan once you sell your home. So this type of loan can create retirement income, provided you adhere to all of the program’s regulations.
But let’s say you’re not living in your home for a certain period of time. Whether it’s for work or a long-term absence, you may have to pay back your loan. Or, if you fail to maintain the home, the bank may require you to repay the money.
State and federal laws have highly regulated these programs; however, there are still risks associated with this lending tool. It’s a good idea to speak with your loan officer or banking professional who can help you understand the risks and implications of applying for and using a reverse mortgage.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. There are significant costs associated with Reverse Mortgages, such as: Up-front mortgage premiums, annual premiums, origination fees, closing costs, monthly service charges, appraisal fees and your Medicaid may be affected.