In our last article, we talked about what a reverse mortgage is and how it works.
Essentially the benefit of a reverse mortgage is that it allows homeowners to take advantage of the value of their home without having to sell their home outright.
While homeowners should weigh their options when considering a reverse mortgage, many older Americans have found smart ways to put it to use to enjoy life and enhance their finances.
Here are six ways that you can put a reverse mortgage to work for you.
1. Pay Off your Mortgage
If you have enough equity in your home, you can use a reverse mortgage to pay off your existing mortgage. This is a great option if you’re in your early 60s, plan to continue working and still have 10-15 years left on your mortgage. Paying off your mortgage allows you to re-direct your income toward paying off any existing debts or investing in retirement.
2. Upgrade Your Home
Many homeowners use a reverse mortgage in the same way they might use a home equity line of credit, as a means to upgrade and improve a home. This can improve the long-term livability of the home, or increase the future value for resale.
3. Purchase Another Home
For some older adults, their current home may not fit their needs. If the kids have moved out, or mobility is an issue, it might make more sense for them to downsize to a smaller more efficient home. Homeowners living in colder regions may want to invest in a winter home or a vacation property.
4. Become Landlords
Some enterprising homeowners are talking advantage of the demand for rental properties and investing their reverse mortgage in multi-unit buildings like duplexes. They can live in one unit and collect rent on one or more additional income.
This provides them with a place to live and additional income streams that they can use to pay their reverse mortgage.
5. Start a New Business
After a lifetime of working a 9 to 5 job or holding down a professional career, some homeowners are using retirement as an opportunity to become entrepreneurs. They may use the reverse mortgage to cover start-up costs for a small venture, or as a means to invest in another small business. While there is no guarantee of success, the funds from a reverse mortgage
6. Enjoy Retirement
Another reason that many homeowners take advantage of a reverse mortgage is simply to enjoy life. Perhaps they’d like to retire earlier so that they can travel, or spend more time with their families. Because there are stiff penalties for early withdrawal of retirement income, a reverse mortgage can provide them with the funds they need while allowing them to leave their retirement funds untouched.
Before making any decisions regarding a reverse mortgage, you should first talk to a HUD approved housing counselor. A counselor’s role is to serve as an impartial guide to help homeowners make the best decision.
Looking for help with a reverse mortgage or other financial issues? We can help. Schedule a free counseling session today or call us at 800-920-2262.