Finance

Can Reverse Mortgage Increase the Net Worth of Clients?

2 Mins read

If you’re a homeowner aged 62 years or above, you can take advantage of a reverse mortgage to convert a part of your equity into cash. Many seniors consider it a great way of funding their retirement and enjoy the benefits of a loan that they don’t have to repay during their lifetime as long as they do not move out or sell their property.

Basically, reverse mortgage solutions allow seniors to take a loan against a certain part of their home equity. So, they make a perfect choice for anyone who wants to increase the funds available to them after their retirement but is not open to the idea of making loan payments. Let’s find out how a reverse mortgage and what are the perceived benefits before we explore if these mortgages could be a way of increasing clients’ net worth.

How Reverse Mortgage Works?

Here is a quick checklist of the key aspects of a reverse mortgage:

  • You can take a loan against a home that you are using as your principal residence.
  • You don’t repay the mortgage until you move out permanently, sell your home, or die.
  • You still have to keep paying your insurance and property taxes.
  • You must maintain your home according to the FHA guidelines.

Key Benefits Of Reverse Mortgage Solutions

Let’s have a look at some major benefits of these loans.

  • You don’t have to make monthly payments towards your mortgage.
  • You never owe anything more than the worth of your home.
  • There aren’t any limitations on how the funds could be used.
  • There are no pre-pay penalties.
  • Your home remains your main residence.

Can It Help Increase Clients’ Net Worth?

Well, probably, it can. First of all, there is no obligation on how you spend the loan amount. Second, there are a couple of reasons why the reverse mortgage solutions make an attractive prospect for high net worth clients i.e. the tax implications and the payment structure.

You don’t have to make monthly payments and, at the same time, you can access your home equity with no tax impact or selling it off otherwise. This, certainly, can help them appreciate their investment portfolios.

The loan payment is deferred and you have access to a virtually tax-free loan which makes exciting prospects for the portfolio-minded high net worth seniors.

For instance, if you’re the owner of a million-dollar home, and its value increases by just 2%, you are in for a $20000 unrealized value gain from year-to-year. If you need $100,000 for an expensive renovation, for instance, you can enjoy a reverse mortgage advance tax-free with annual deferred interest costs of around 5% or less. Considering the long-term home equity increases, a reverse mortgage makes a more viable option compared to cashing out pre-tax $142,000 from a RIF for getting an equivalent amount of cash.

Overall, a reverse mortgage can be a great addition to your retirement plan and if you want to explore your options now, get in touch with Blake Mortgage – a trusted mortgage provider in Scottsdale, AZ.