For many years, reverse mortgages have been one of the least understood mortgage loans in the marketplace. That's been changing little by little and now many Financial Planners and CPAs are discovering that the government-insured Home Equity Conversion Mortgage for seniors can dramatically increase the likelihood of a senior's funds lasting all the way through retirement.
In addition to eliminating the need to make a monthly mortgage payment, this reverse mortgage may also provide a guaranteed monthly income, a larger income for a specific period of time, or access to cash at closing or a line of credit for future use. Seniors may even blend these disbursement options to customize the benefit to fit their individual needs.
The line of credit feature is what has caught the attention of retirement planners however. Built in to this option is a growth rate factor. The unused portion of the line of credit grows in value over time which results in a larger amount being available for future use. Seniors who take the reverse mortgage early in retirement and leave the funds unused in a line of credit will find that they have a large pool of money available should their other retirement funds begin to run out. This gives the senior and their retirement planner the flexibility to maximize the cash flow during the retirement years.
A recent study by Dr. Wade Pfau of the American College of Financial Services concludes that seniors who use the reverse mortgage line of credit increase the likelihood of having their money last through retirement are significantly higher than even those who elect to take a reverse mortgage after their other funds have been exhausted. Reverse mortgages are not a one-size fits all tool. In fact, they aren't right for every senior. They are, however, perfect for many!