Reverse mortgages can be used to accomplish a variety of retirement needs, depending on the particular circumstances of the borrower. Whether this means using a reverse mortgage to fund future long-term care costs, buy a new home or protect other retirement assets, there are various strategies worth considering for how retirees can leverage their home equity, according to a recent Investment News article.
“Financial advisers who dismissed reverse mortgages in the past may want to take a second look,” writes Mary Beth Franklin for Investment News. “Consumer protections have increased and set-up fees have been dramatically reduced. Leading researchers believe reverse mortgages could solve some of the income challenges of retirees who saved too little to finance a retirement that could last decades.”
The article spotlights nine “surprising” ways to use a reverse mortgage, including commonly touted strategies such as using these loans to pay off an existing mortgage, optimize Social Security draws and paying for future health care related expenses, to more complex methods such as using a reverse mortgage to manage taxes, pay Roth conversion taxes and usage in a “gray divorce.”
In this last strategy, the article states that older couples can use a reverse mortgage to divide a marital housing asset.
“In one scenario, the spouse remaining in the home can take a lump sum distribution from a reverse mortgage to buy out the other spouse,” the article states.
A second scenario would entail the sale of the marital home, with each ex-spouse using some of the sale proceeds to obtain a reverse mortgage to buy their respective new homes, according to Shelley Giordano, chair of the Funding Longevity Task Force, who was cited in the article.
View the nine “surprising” ways to use a reverse mortgage.
Written by Jason Oliva