Retirement may be just around the corner, but you might not have enough money to make ends meet. Unfortunately, this has become a common concern for millions of Americans who are fast approaching retirement age. To make matters worse, we are living longer, more active lives. As such, you don’t need to plan for 10 years of retirement but for 20 or even 30 years.
Enter the reverse mortgage. This is fast becoming one of the most popular retirement planning options and with good reason. For millions of Americans, their home is the most valuable asset they own. In addition, baby boomers have had to live through a period of tremendous volatility – remember the dot.com bust and the Great Recession.
As such, it makes sense that they that are looking at reverse mortgages and here are some of the reasons why these loans are popular today.
Reverse Mortgages are Become More Widely Accepted
For years, these loans were looked down upon. But the pundits are starting to change their tune. Even the New York Times has begun to extol the benefits of reverse mortgages. Part of the reason for this change is that fact that many retirement planners see that for most seniors, their money is really tied up in one thing – their homes.
Another reason for the change of heart is that the government has updated the protections under reverse mortgages and this has helped millions of borrowers. One such protection is the limit on reverse mortgages going underwater. This means that the amount owed on the loan can never be more than what the property is worth.
That being said, there are several requirements which borrowers must meet before they can qualify for a reverse mortgage. These qualifications include proof of income to ensure that a borrower can property taxes, homeowner’s insurance, and utilities. In addition, reverse mortgages only apply to the borrower’s primary residence. Lastly, you must be 62 years old to qualify for these loans.
Reverse Mortgages are Tightly Regulated
As mentioned, the qualifications for these loans are tightly regulated. But an often-overlooked factor for the growing popularity for reverse mortgages is the mandated counseling for these loans. This ensures that every borrower understand the terms and conditions of these loans and how they will need to repay them when the time comes.
These rules help to make sure that the landscape for reverse mortgages does not resemble the ‘wild west’ and with good reason as an unfortunate fact as that there is no shortage of unscrupulous people who are willing to take advantage of seniors for their own benefit.
More Lenders are Offering Reverse Mortgages
While reverse mortgages have been around since the 1960’s, another reason why they are becoming more popular is that more and more lenders are offering them. As such, these loans have moved from something which was only offered by specialized lenders to the mainstream.
Some states have benefited by this as borrowers now have a real choice. For example, there are a whopping 905 lenders in California alone. This is a big plus and borrowers can compare the specifics of each program and decide what is the best fit for them.
A Better Fit for Today’s Seniors
Today’s seniors face a conundrum. They are living longer, more active lives but the economic volatility of the last 30 years has left them more vulnerable. Not only do they lack the security of a pension fund, but they also know that Social Security alone is not the answer.
This is where a reverse mortgage comes into play as today’s seniors hold almost as much in home equity as they do in strict retirement assets. Having a reverse mortgage allows seniors the opportunity to augment what they have in place – getting more bang for their buck over time.
In addition, reverse mortgages offer the flexibility of choosing lump sum payments, monthly payout, or even a line of credit. All of which while not needing to service the loan during its tenure. This is a big plus for seniors living on a fix income and it makes sense why more people are considering reverse mortgages.
At the end of the day, it is up to you. Talk to your financial planner and see how a reverse mortgage would make sense given your current situation.