The investment portfolios have taken a beating ever since the coronavirus outbreak, which put the global economy to a halt. Investors are unhappy with the more than 10% drop in the S&P500 but what about the retirees who depend on their investments for income? And if those drop happen at the beginning of their retirement, they could lock in a lower nest egg permanently, and this is referred to as sequence of return risk.
As per the financial experts, the best thing to do when the market is down is to avoid taking money out from their investments. However, that doesn’t apply to all. So, how can retirees ride out the ongoing market decline? Reverse mortgage.
Reverse mortgage applications have soared in the past few weeks. The applications for HECM, which is the most popular type of reverse mortgage, has increased by 15% in March. It marked a 50% increase in the first quarter compared to the same period in 2019. Reverse mortgages could be a secondary source of cash, making it an excellent option for retirees who are looking for a different source of income.
The Nuts and Bolts
Unlike traditional loans, a reverse mortgage Myrtle Beach lets older homeowners, at least 62 years old, to tap into their home equity without the need to pay their debt back as long as they live in the house.
The amount you can borrow depends on three factors. These are the age of the youngest borrower, the interest rates, and the appraised value of the house. The maximum amount that you can take out is $765,600 even if your home has a higher value than that. In case you still have a mortgage on your house, you can use part of the proceeds of the reverse mortgage loan to pay off your debt.
In many cases, the interest rates on this type of loan are adjustable, however, they are similar to traditional loans plus 0.5% of the outstanding balance of the mortgage for the mortgage insurance premium.
The proceeds from a reverse mortgage loan is considered as a use of the home equity and that’s why it is not taxable.
You have three options as to how you can receive the funds from your reverse mortgage loan. The first option is a lump sum wherein you get the entire loan amount upfront. Some financial planners discourage retirees from choosing this option over fears that they could blow through their cash quickly.
Annuity is another option. It will give you regular monthly payments as long as you stay in your house. There’s a process that needs to be followed in calculating the amount of cash you will get based on your age.
The last option is the line of credit. It is the option that many specialists suggest. This option earns interest until you use it, which your money could grow even more.
Call Reverse Mortgage Specialist if you wish to know more about reverse mortgage and if it is best option for you.
Reverse Mortgage Specialist
1293 Professional Drive, Suite 204
Myrtle Beach, SC 29577