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June 11, 2021
Generally speaking, the uses of reverse mortgages are endless. And, you get to choose the best way to manage or spend the money from the loan.
Most seniors use a reverse mortgage to help close a gap between their retirement expenses and their retirement income. Reverse mortgages eliminate monthly mortgage payments and give you access to cash while enabling you to continue to own your home.
However, reverse mortgages also offer particular financial advantages when used by seniors as an estate planning or wealth preservation tool in a retirement plan.
Consider the following smart and sophisticated uses of reverse mortgages:
Long term care is a big risk to most seniors’ financial planning for retirement.
While 42 percent of people over the age of 65 require or will require long term health care, neither Medicare nor Medicare supplemental insurance will cover the costs of these services – either in your own home or in a nursing facility. Moreover, most seniors don’t have long term care insurance.
Of the many uses of reverse mortgages, retirement planners often recommend that their clients secure the loan to help fund a long term care or other medical costs.
Using a reverse mortgage to pay for medical costs and/or insurance can be an important part of asset protection planning for the benefit of you and your heirs.
You might consider using the proceeds from a reverse mortgage to fund a life insurance product. This is particularly useful if you have built up significant home equity.
Funding a life insurance policy with a reverse mortgage gives you control over your estate and assures the legacy you leave retains its value.
The full value of your home is subject to estate tax, but a reverse mortgage against the property reduces its value – lowering applicable estate taxes. Your heirs will not owe as much estate tax upon the sale of your home. Furthermore, if you have purchased life insurance, then the policy pays the benefit to heirs in tax-free dollars.
By purchasing a life insurance policy with funds from a reverse mortgage, you know exactly what you are leaving behind.
Real estate markets can be tricky. Purchasing a life insurance policy with reverse mortgage funds provides for greater control of your estate and legacy.
If you have equity in your home, you may want to explore how a reverse mortgage could be an important component of your estate plan. (To discuss estate planning and other benefits of a reverse mortgage, click here to be contacted by a prequalified reverse mortgage lender.)
If you take your reverse mortgage loan amount as a Home Equity Line of Credit, then this account will grow annually. This locks in your current home value, and your reverse mortgage line of credit over time might be larger than future real estate values if the market goes down.
Personal finance is complicated. However, put simply, you want to maximize returns and minimize losses. A reverse mortgage can help with this goal. It can be one of the levers you use to maximize your overall wealth.
Imagine that you need $2,000 for something. Wouldn’t it be nice to have choices for where to get that money — especially if your investments are suffering losses? A reverse mortgage — especially a reverse mortgage line of credit — can give you that kind of flexibility.
If you are thinking about a reverse mortgage, you might be put off by the costs associated with the loan. A reverse mortgage line of credit is one way to reduce the interest and up front fees you might otherwise pay.
When you secure a reverse mortgage line of credit, you only pay interest on the money you use — not the money in the account. In fact, the account accrues interest. Some lenders also reduce fees for people who are getting a line of credit.
Find out if you qualify for the loan and how much you can get.
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