Are you or your parent(s) age 62 or older? There is an expression called “CASH IS KING!” During what I call “The COVID-19 era,” many employees and business owners have taken involuntary pay cuts. This income-reduction is stressful and makes it difficult to pay bills as well as saving for retirement. Unless you own a business, there are only so many ways to increase revenues and/or monthly income to generate more monthly cash flow.
The older one gets, the more life becomes about making difficult decisions, and perhaps, having difficult and often emotional family conversations. We ask ourselves questions like: Do I/we have enough money set aside for retirement? Do mom and dad have enough money to stay in their home? How do we finance long-term care? If you have asked yourself these questions, perhaps you should consider looking into a reverse mortgage. With a reverse mortgage, instead of you paying the bank every month, the bank pays you! Also, because the money received is loan proceeds it’s tax-free*.
Last week, we went in-depth on how to improve your FICO score and fix your credit. FICO scores reflect your credit history among other factors. While not dependent upon a mere FICO score today a reverse mortgage borrower’s credit history is considered as part of the qualification process. Even at the height of the pandemic a record number of homeowners 62 and older are applying for the loan. Not unlike life insurance the reverse mortgage is a misunderstood financial tool. I will go in-depth on life insurance in a future column.
HOME EQUITY is the largest cache of savings for most households entering retirement; yet, it is typically the most underutilized retirement asset! Reverse mortgages can help you enjoy greater financial flexibility, whether you are in retirement or still working if you are age 62 or older, should you qualify. A reverse mortgage can help you; refinance existing mortgage debt eliminating the existing principal and interest payments, consolidate high-interest rate credit cards or student debt (to lower your monthly payments), make large cash purchases, fund home renovations, or pay for college etc.
It is important to “know what you don’t know,” so I interviewed Bill D’Onofrio, a HECM (Home Equity Conversion Mortgage) loan specialist over lunch on Tuesday (Yes, I paid, LOL). The first thing Bill told me is “Reverse Mortgages are no longer only for the needs-based borrower. Many more affluent borrowers are seeing the benefit using home equity to fund a safe and secure retirement. It is no longer about need; it is about efficiency and leverage.”
The top 5 REVERSE MORTAGE MYTHS mortgage are:
Reverse mortgages, like most annuities, can help borrowers set up a predictable cash flow stream. My belief is that increasing your monthly cash flow can, over time, get you out of any bad financial situation hence, “CASH IS KING!”
* Always seek the advice of a tax professional.