There are great benefits to taking out a reverse mortgage in California; specifically, it can free up needed funds, making your life easier and more enjoyable. Check out how a home equity conversion mortgage can help you improve retirement spending during your golden years.
Benefits of an HECM in California
According to Forbes Magazine, there are a number of ways that your reverse mortgage can help you with retirement spending:
1. Reverse mortgages come with a standby line of credit that works in conjunction with your portfolio to get you the maximum return on your investment. For instance, if you have a huge stock investment take a tumble on the market, the standby line of credit can mitigate the losses you suffer as a result.
2. A reverse mortgage will help you with overall portfolio spending. For example, if you decide that you will spend up to 10 percent of your portfolio’s positive returns and save the rest for another time, the money you will then use to finance your retirement will come from the returns received on the reverse mortgage after investiture. This will allow you to maintain a balanced income and funding sources.
3. A reverse mortgage will allow you to leave a larger nest egg for your heirs. Remember, though, that a reverse mortgage must be paid back if you move out of the house or when you die. To ensure your heirs do not suffer financially, you need to have enough funds in your overall portfolio to cover the cost of paying back the reverse mortgage. Alternatively, you can include provisions that stipulate your house is to be sold upon your exit and the reverse mortgage is to be paid back out of the proceeds.
4. In the event that you and your financial adviser decide it is best to convert a traditional IRA to a Roth IRA, you will be required to pay taxes on this conversion. The reverse mortgage, in this scenario, will help you pay these taxes.
5. Finally, a reverse mortgage will provide you with funds in the event of an emergency — such as an unexpected surgery or a battery of medical tests and treatments.
Additional Things to Keep in Mind
1. You should not use a reverse mortgage as a last resort. It would be very difficult, in fact, to do this because you have to demonstrate to the lender that you are capable of paying all of the expenses on the home — including taxes, insurance, HOA fees and any maintenance the home may require. Instead, if you take out the reverse mortgage and save it for a rainy day — or, better yet, put it into an interest-bearing account — you can actually make money on your investment until such time that you need to use it.
2. Even though you can get a reverse mortgage when you turn 62, sometimes, social security benefits do not kick in until well past your 65th birthday. In addition, what you receive from the social security administration may not be enough to cover your day-to-day living expenses, especially if you’ve retired earlier than you previously planned. If this is the case, however, the money that you receive from a reverse mortgage can serve as a supplemental income.