In today’s high cost of living economy, there is a solution for seniors who are house rich, but cash poor.
“It’s a common problem, and a lot of seniors don’t know the abundance of equity in their home can help them if they are living on small pensions and are struggling to get by every month,” Evans says. “They can get a mortgage where they don’t have to make a payment on it for as long as they live in their home.”
That freed up money can be used for any purpose - living expenses, travel, purchases, or even investments. And it is tax free.
“It’s an ideal situation for many people,” Evans says. “They can take out money as they need and be able to supplement their income, or take out a large chunk and put it into investments that provide them with a monthly return.”
For those seniors who are concerned that borrowing from their home equity will leave less for their children to inherit, Evans says depending on the amount drawn an investment could also help provide for a portion of funds passed on to children.
“But a lot of the time it’s not the seniors who are contacting me about this type of mortgage, it’s their children who are concerned about the wellbeing of their parents,” Evans says.
Other plusses of a reverse mortgage is that the loan will never be called, as long as the homeowners live in their home, and no payments are required.
The balance of the mortgage simply increases each month and is ultimately paid off through the individual’s estate when they move into care or pass on.
“It’s a valuable product for seniors to improve their quality of life at a reasonable cost, considering the benefit they get,” Evans says, adding a rising real estate market can also provide a “lift” to the reverse mortgage strategy.
“Generally, real estate increases in value. So even with the mortgage balance steadily increasing, many times the owners find their equity increases and can outpace the mortgaged amount,” Evans says.
To qualify for a reverse mortgage the homeowner must be 55 or older and live in their home.