The economic toll of the COVID-19 coronavirus pandemic becomes more visible with each passing week, and for those who are looking at avoiding an adverse effect on retirement accounts and savings, a reverse mortgage may provide an option to avoid the economic shocks of the moment. This is according to writers Douglas A. McIntyre and Paul Ausick in a column at USA Today.
“Reverse mortgages often get a bad rap, but there are circumstances where they may answer a need,” the columnists write. “If your home is your largest asset and you need cash and have no other way to get it, this may be your best option. To get one, your mortgage must be paid off (or nearly so).”
Weighing your other options in terms of solving a financial issue should be done before going through with a reverse mortgage, but this may provide additional flexibility for those who wish to gain access to additional cash without having to sell or move away from the home, the men write.
“Weigh the amount a cash sale would bring against the amount you could get from a reverse mortgage, including all fees,” McIntyre and Ausick write. “An additional consideration is that taking a reverse mortgage means you do not have to move and that you can meet the ongoing costs (heat, maintenance, etc.) of staying put. It also means you are not planning to leave your house as part of your estate.”
Reverse mortgages are often used to wipe out any remaining forward mortgage payments a senior may have, but for those who have already paid their mortgage off, other options may be worth exploring, the duo says.
“Reverse mortgages are one option, but if your mortgage is paid off you might consider a home equity loan,” the column reads. “If you still have a mortgage, a cash-out refinance is another option. While neither is technically a second mortgage, they serve the same purpose — turning the equity you have in your home into cash (actually new debt) that is secured by the house itself.”
Other explored options for getting additional cash during the pandemic include cutting down on contributions to your 401K account; dipping into your IRA; reconsidering your choices when it comes to your personal vehicle; re-examining your Social Security strategy; move more investments into fixed income; downsizing your home; or relocating to a less expensive state.
It may also be wise to, depending on your own personal circumstances, plan on living until at least age 90 since life expectancy has gone up in recent years, the duo writes. Transferring wealth and planning to work for longer may also be options worth consideration in the moment.
Read the column at USA Today.