The mainstream might not be reporting on it as accurately as you would like. But spiking inflation due to current presidential administrative decisions like the mandated COVID-19 lockdowns, weekly cash emergency unemployment payments, a supply chain crisis, and worst of all, executive order legislation that destroyed America’s energy independence, has likely left you wondering how you’re going to pay your bills.
This is an especially rough situation if you’re a retired couple living on a fixed income. But if you’ve lived in your family home for decades, there is potentially, good news on the horizon. If you’re 62 or older, and have been paying your monthly mortgage without fail for years, you are eligible to apply for a reverse mortgage.
If approved you can potentially receive proceeds in the hundreds of thousands of dollars. You can either take your proceeds in one lump sum payment or equal monthly disbursements according to your wants and needs. This money will most definitely help you fight the federal inflation beast. To find out how much of a reverse mortgage you might qualify for, go to this online site: https://reverse.mortgage/calculator
But what should retirees be aware of when it comes to using a reverse mortgage to battle rising prices? According to a recent report by CNBC, a growing number of aging Americans are using up all their retirement savings. The fear of running out of money has only been exacerbated by the ongoing monthly inflation spikes which have been eating away at retirees’ savings portfolios.
The consumer prices index (CPI) under the current administration shot up to close to 5 percent in early 2022 when compared to just 0.9 percent during the previous administration. With retirees seeking financial advice on how to preserve what’s left of their wealth, many are turning to new retirement plans that also include a reverse mortgage
Says the President of the Housing Wealth Institute, retirees in 2022 are now giving reverse mortgages a more calculated look. This makes sense since it’s said that while Americans have been reporting a record amount of equity saved up in their homes, the pandemic made it difficult for them to gain access to it.
Several major banks halted their home equity line of credit programs due to rampant economic uncertainty. The result is that in 2022, seniors aged 62 and older have been flocking to reverse mortgage programs, especially as the stock and crypto markets continue to take one major hit after the other.
A professor of income at the American College of Financial Services stated recently that reverse mortgages can also be utilized as a proactive financial measure. With retirees mulling over their options for saving cash, financial experts are said to be promoting reverse mortgages since at base, they offer protection against rising inflation. Keep in mind, if the promised student debt relief program is found to be legal in the federal courts, inflation will only get worse.
Under normal circumstances, retirees spend the proceeds that come in from their investment portfolios while protecting their home equity. But studies have shown that a reverse mortgage can be a real benefit to your retirement plan. The major impact is that it will reduce the pressure on your retirement portfolio by adding upwards of hundreds of thousands of dollars of cash toward it.
There’s no arguing that retirees who qualify for a reverse mortgage will have more spending money that won’t be debited directly from their retirement portfolio, allowing it to keep on growing. It’s important to open a reverse mortgage line of credit as soon as possible since interest rates are rising monthly. As inflation gets higher, it will spike the growth on your line of credit.
But like anything else when it comes to your financial choices in these difficult times, there are some downsides to reverse mortgages. One of the biggest of these will be its cost. When approved for a reverse mortgage, retirees will be expected to pay upwards of 2 percent of the property’s appraised value for its mortgage insurance premiums. This payment must be made in cash, upfront. You will also need to pay 0.5 percent of the insurance’s outstanding balance for every year of the loan’s life.
In mathematical terms, the origination fee is said to be 2 percent of the first $200,000. Anything above that is 1 percent up to $6,000. Also, keep in mind, that the primary borrower must remain in the home for the rest of his or her life. When the borrower dies, it will be up to the surviving children to pay the loan back, usually with the proceeds from the sale of the home.
