By Tyler Plack
Tyler Plack is the President of South River Mortgage. Tyler holds an active FHA Direct Endorsement (DE) underwriting certification and is the author of The Retirement Solution: Maximizing Your BenefitTyler is a seasoned entrepreneur and real estate investor renowned for his expertise in reverse mortgages and his commitment to addressing seniors' equity challenges. Tyler brings a unique perspective to his ventures, having built several successful companies throughout his career. His insights are frequently sought by industry publications, where he is recognized for his vast knowledge in the realm of reverse mortgages.
An avid investor in income-producing properties, Tyler is dedicated to helping seniors navigate their financial needs with compassion and expertise. When Tyler is not helping solve America's retirement crisis, he is a skilled pilot flying airplanes for fun.
You may have worked hard, saved for retirement, and paid off most or all of your home. But what happens if your retirement savings start to run low?
For many retirees, this is a real concern. Social Security may cover some expenses, but rising costs can make it harder to make your savings last.
Your home may be worth hundreds of thousands of dollars, but that money is tied up in your home. A reverse mortgage may give you a way to use some of that equity without selling your home.
Let’s look at how this could fit into your retirement plan.
Your Home May Be Your Largest Financial Asset
For many homeowners, their home is worth more than their retirement savings.
Imagine you have:
* $200,000 in retirement savings
* $2,500 a month in Social Security
* A home worth $500,000
* Little or no mortgage debt
You may feel comfortable today. But what happens if your savings begin to run out?
You could sell your home and move. You could downsize. You could use other types of home loans. Or, if you qualify, you could consider a reverse mortgage .
A reverse mortgage can let eligible homeowners age 62 and older access part of their home equity while continuing to live in their home.
You Don’t Have to Spend Your Savings First
Many retirees use their savings to cover expenses that Social Security does not.
That can work for a while. But every dollar you take from your savings is one less dollar available for the future.
This can become a bigger concern if you live longer than expected or face higher costs for things like:
* Home repairs
* Property taxes
* Healthcare
* Insurance
* Groceries
* Car repairs or replacement
* Unexpected expenses
A reverse mortgage may give you another source of funds to consider.
Instead of relying only on your retirement savings, you could use some of your home equity as part of your overall retirement plan.
How Could a Reverse Mortgage Help?
A HECM reverse mortgage offers several ways to access your available funds.
Depending on your situation, you may be able to receive money as monthly payments, a line of credit, a lump sum, or a combination of these options.
For example, a homeowner might use reverse mortgage funds to help cover monthly expenses. Another homeowner might keep a line of credit available for future needs.
The goal isn’t necessarily to replace your retirement savings.
It may be to make those savings last longer.
What If Your Investments Lose Money?
Investment markets go up and down. A large market drop can be especially difficult for someone who is already taking money out of their retirement accounts.
Some retirees may want another source of funds during these periods rather than selling investments when their value is down.
A reverse mortgage line of credit may provide another option to consider.
This doesn’t mean a reverse mortgage is always the best choice. It means your home equity can be part of the conversation when you’re building a retirement plan.
You Can Use Home Equity Without Selling Your Home
One of the biggest reasons homeowners consider a reverse mortgage is simple:
They want to stay in their home.
Selling your home gives you access to your equity, but it also means moving. Leaving the memories you’ve created over all those years.
A reverse mortgage may allow you to remain in your home while accessing some of your available equity.
You still own your home. However, you remain responsible for property taxes, homeowners’ insurance, maintenance, and other loan requirements.
Are You Eligible for a Reverse Mortgage?
(Find out in 60 seconds)
A Reverse Mortgage Is Not Free Money
It’s important to understand that a reverse mortgage is a loan.
Interest and other costs are added to the loan balance over time. As a result, the amount you owe generally grows.
The amount you can access also depends on factors such as your age, home value, interest rates, and existing mortgage balance.
That’s why a reverse mortgage should be viewed as one possible retirement planning tool, not a quick fix for running out of money.
Start Planning Before Your Savings Run Out
You don’t have to wait until your retirement account is nearly empty to think about your options.
Consider asking yourself:
* How long could my savings last?
* Will Social Security cover my basic expenses?
* What happens if my expenses increase?
* What major home repairs might I face?
* Do I want to remain in my home?
* How much home equity do I want to leave to my heirs?
* Would a reverse mortgage make sense for my situation?
These questions can help you look at your retirement finances from a different perspective.
Your home isn’t just where you live. It may also be one of the financial resources you’ve built over your lifetime.
Look at Your Whole Retirement Picture
A reverse mortgage isn’t right for everyone. But if you have significant home equity and are concerned about making your retirement savings last, it may be worth exploring.
The question isn’t simply, “Should I get a reverse mortgage?”
A better question may be:
“How can I use the resources I’ve built to make my retirement money last?
Your savings, Social Security, investments and home equity can all be part of that conversation.
See What You May Qualify For
If you’re considering a reverse mortgage, the best place to start is to run the numbers and talk it through.
You can get a personalized estimate in seconds using our free calculator. No pressure. No obligation.
If you’d rather talk it through with a real person, our team is happy to walk you through your options. Call us at (888) 249-5651
Frequently Asked Questions
Can a reverse mortgage help me avoid running out of retirement money?
It may. A reverse mortgage can give eligible homeowners access to some of their home equity. This can provide another source of funds if your Social Security and retirement savings aren’t enough to cover your expenses.
Do I have to use a reverse mortgage all at once?
No. Depending on the type of reverse mortgage and your available funds, you may have options such as monthly payments, a line of credit, a lump sum, or a combination.
Can a reverse mortgage help my retirement savings last longer?
It can, depending on how you use the funds. For example, some homeowners may use home equity to cover certain expenses instead of taking as much money from their retirement investments.
What if my retirement savings run out?
Your options will depend on your income, expenses, home equity, and other assets. A reverse mortgage may provide another source of funds, but it is best to consider your options before your savings are depleted.
Can I get a reverse mortgage if I still receive Social Security?
Yes. Receiving Social Security does not automatically prevent you from getting a reverse mortgage. However, your overall financial situation will be considered.
Do I still own my home with a reverse mortgage?
Yes. You remain the owner of your home. You must continue to meet the loan requirements, including paying property taxes and homeowners’ insurance, maintaining the home, and living in it as your principal residence.
Will a reverse mortgage affect my Social Security or Medicare?
A reverse mortgage generally does not affect Social Security or Medicare benefits. However, reverse mortgage proceeds could affect eligibility for certain needs-based government programs, such as Medicaid or Supplemental Security Income (SSI). It’s a good idea to speak with a benefits specialist about your specific situation.
Is a reverse mortgage a good idea if I have a lot of home equity?
It could be, but home equity alone doesn’t determine whether a reverse mortgage is right for you. Your income, expenses, age, home value, mortgage balance, financial goals, and plans for your home should all be considered.
What happens to my home when I die?
A reverse mortgage becomes due when the last borrower permanently leaves the home or dies, subject to the loan terms. Your heirs generally have the option to sell the home and use the proceeds to repay the loan or pay off the loan and keep the home.
Should I wait until I run out of retirement savings?
Not necessarily. Planning ahead may give you more options. A reverse mortgage can be considered as part of a retirement plan before your savings become critically low
