Mar 28 2008
Who is the Reverse Mortgage For? Part 3
This is the third post in a series.
Now let's look at a few of the situations where the reverse mortgage makes perfect sense. Clearly, if the senior could benefit from extra monthly cash flow in any way, the reverse mortgage is a potentially good option. AARP reports that 44% of people over age 60 have saved less than $75,000 for retirement and cite social security as their primary source of income. Fortunately, these numbers exclude home equity. With life expectancy much greater today than 20 years ago, it is evident that many seniors simply do not have enough money to fund their lengthy golden years. For them, the cash flow or a home-equity line of credit "nest-egg" from a reverse mortgage could be a great thing.
In many cases, health and related expenses become an issue. Some seniors have had many relatively care-free years, depending on their social security income and a little savings to cover their bills. But recently medical issues have started cropping up and as time marches on, the potential of more problems only increases. The senior might try applying for long term care insurance, but find that the opportunity passed back when they were 50 years old and healthy. Now the prospects of paying for proper medical care (even the deductibles), in-home care, and prescription drugs are daunting. The smart and prudent move would be to plan ahead and obtain the reverse mortgage in order to be financially prepared.
As a lump sum, the senior could use the reverse mortgage to pay off an existing mortgage, and increase their monthly cash flow by hundreds, or even thousands of dollars each month. Or they could use it to pay for home upgrades to improve the accessibility and mobility in the home. Some have even used the lump sum to purchase a second vacation home! There are a million uses for additional funds.
