A reverse mortgage is a type of financial product that can potentially provide real relief in the form of additional cash flow for the right borrower and should not be overlooked. This was reported by Linda Leitz, a member of the Standards Resource Commission and the Certified Council for Financial Planning, in a column published by The Gazette of Cedar Rapid, Iowa.
In her second two-piece By considering the potential effects of a reverse mortgage on a well-suited borrower, Leitz seeks to determine the prospect of a reverse mortgage, when exactly the “right time” for such a loan should be seriously scrutinized.
“For a retiree who has a mortgage on their home, if the payment restricts the money available for other living expenses, a reverse mortgage can ease the pressure,” she writes. “Depending on the age of the homeowner and the assessed value of the home, a reverse mortgage can pay off an existing mortgage, eliminating paying for the home. There may even be enough capital to provide the borrower with a line of credit. The line of credit can be opened for monthly payments to the borrower or provide an opportunity to raise money as needed. “
A reverse mortgage line of credit is one of the most cited product characteristics that financial planners describe, explaining the rise in receptivity that some planners have explained to their audiences over the years. However, if a potential borrower owns their home “free and clear” without having a forward mortgage on the home at this time, then a reverse mortgage may still require consideration, she says.
“Sometimes a home without a mortgage is a retiree’s biggest asset,” Leitz writes. “If this household could use a little more cash, it could benefit from a reverse mortgage. The lump sum can be invested for future use, or a line of credit can be set up to provide monthly cash flow or the ability to periodically raise funds. ”
The concept of home equity conversion mortgages (HECM) to buy (H4P), a relatively under-used version of reverse mortgages that some loan officers see as a potential way forward for the industry as a whole, is also being explored, according to propaganda previously conducted by RMD.
“Retirees often cut the size of their home, and retirees are common when they decide to move closer to their family. In these situations, you can use a reverse mortgage to buy a home, ”the column says. “The size of the mortgage will depend on the age of the borrower and the estimated value of the house being purchased. Depending on these factors, a line of credit may also be available for the home. ”
Read the second from two reverse mortgage columns written by Leitz in The Gazette.