Could a Reverse Mortgage Help Save You Money?

Blog content updated on 11/7/2021

With many of today’s senior homeowners finding themselves “under-saved” for retirement, consumer advocates say that taking out a reverse mortgage could be a smart way to save money. In an NBC Nightly News video, correspondent Olivia Sterns reports on this hot topic, including the features of a reverse mortgage and how recent revisions have made the program safer for older adults.

Take a step toward financial piece of mind.

Half of Americans say their top concern for retirement is running out of money1. With people living longer, healthcare costs rising, and inflation rampant, it’s easy to understand why.

When times get tough, and people need much of their income just to pay for everyday expenses, saving money takes a back seat. A 2019 study found that one in five US adults aren’t putting any cash aside for retirement or unforeseen financial emergencies2.

As a result, many people are left with less savings than they need to live the retirement they want. According to the Federal Reserve, only 36% of Americans think their retirement savings are on track.3

So, what can you do? Here are a few ways to help you save money in retirement:

1. Make a budget and stick to it.

Start by looking at your purchases and spending habits versus the funds you have available and can afford to spend. You may be surprised to find unnecessary expenses that can easily be eliminated—every little bit helps. This will help you set a realistic budget that can help you avoid over-spending and depleting your assets.

2. Create new sources of retirement income.

Studies show that those with a guaranteed income stream are happier and far less stressed than those who are left to make random withdrawals from their retirement accounts.4

Even a small amount can help your retirement savings last longer. Having a part-time job or side business doing something you enjoy could ultimately help you withdraw less from your savings.

3. Make debt payment a priority.

Interest payments can eat up a significant part of an already tight budget: paying off as much as you can now, could make a big difference. Start with debts that accrue the most interest, such as credit cards. Then focus on fixed rates and payments, such as a mortgage or vehicle loan. As you eliminate your debt load, you’ll have more cash every month to use for expenses.

4. Maximize Social Security benefits.

Saving more money in retirement may allow you to wait to take your Social Security benefits. For each year you defer them, benefits increase by 8% until the age of 70. Delaying until the full retirement age of 67 or later can increase the lifetime value of your benefits by hundreds of thousands of dollars.

5. Evaluate your housing situation.

Consider whether your current home still meets your needs, and if downsizing to a more affordable home could help you save in mortgage payments, property taxes, home insurance, and maintenance.

If relocating is your best option, a Home Equity Conversion Mortgage (HECM) for Purchase can help you buy a new home without having to make monthly mortgage payments.5 It’s a type of reverse mortgage designed to help older adult homeowners buy the home they need, while still meeting their financial and retirement goals.

6. Tap into your home equity with a reverse mortgage.

What if you don’t want to move, and money-saving measures aren’t enough? If you’re age 62 or older, a reverse mortgage can help. Funds from a reverse mortgage will first be used to pay off your existing mortgage—and since no monthly mortgage payments are required on the reverse mortgage,5 you can eliminate that monthly expense and have more cash every month.

Protection against inflation.

With prices rising on just about everything, the cost of living is skyrocketing. Financial experts say adding a reverse mortgage to your retirement plan can help fight inflation.6

A reverse mortgage allows you to create an additional source of retirement income that gives you more money to spend—while giving your invested assets, such as savings and retirement accounts, a chance to grow.

“The old adage was to wait until you run out of money and then do a reverse mortgage,” says Don Graves, President of the Housing Wealth Institute. “That’s absolutely not the way it’s being used now.”

How does a reverse mortgage work?

It’s an FHA-insured loan program for homeowners age 62+ that lets you access a portion of the equity in your home to increase your cash flow. You retain ownership of your home, and the loan doesn’t come due until the last borrower no longer lives in the home. No monthly mortgage payments are required as long as you continue to pay property taxes, home insurance, and keep the home in good repair. You can take the proceeds as a lump sum, in monthly payments to yourself, as a growing line of credit, or any combination of these options.

How can you use the money?

As the biggest source of wealth for most households, home equity can be used in many ways to help fund your retirement, including:

  • Establish a growing line of credit to protect against future expenses.
  • Help pay for healthcare costs or long-term care insurance.
  • Reduce credit card balances or other debts.
  • Make home repairs or upgrades.
  • Create a new source of monthly income to pay everyday bills and expenses.
  • Avoid making taxable withdrawals from your retirement account by replacing the money with income tax-free reverse mortgage proceeds.7

To learn more about a Longbridge reverse mortgage, call 855-523-4326 or fill out the form on this page to get a free info kit. There’s no cost and no obligation.

 To watch the full NBC Nightly News video, click here.

  5. Real estate taxes, homeowners insurance, and property maintenance required.
  7. Consult a financial advisor and appropriate government agencies for any effect on taxes or government benefits.

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