For those facing difficult and unexpected life events, one of the heaviest and most difficult things to deal with is household finances. A book written by a certified financial planner adapts the book’s topic specifically to this topic and, in one chapter, details how a reverse mortgage could be used strategically for someone who has suffered the loss of a spouse.
This is according to a chapter of “Inheriting Your Spouse’s IRA: The Widow’s Guide to Keeping More of Her Assets,” written by columnist, entrepreneur and Certified Financial Planner (CFP ™) Bill Harris, published late last year. . A chapter specifically detailing how a reverse mortgage can be incorporated into such a spouse’s financial plan was recently reprinted in The Street, and explains specifically why a reverse mortgage might make sense to some, and how conversations about the category of products have evolved in recent years. .
“Each month the loan balance increases as interest and fees are added,” Harris explains in the book. “As the loan balance increases, it reduces the equity in the home. The owner (s) or their heirs will eventually have to repay the loan, often by selling the home or buying it at its appraised value when the loan matures. As a “non-recourse” loan, the borrower (or the estate) is not responsible for any shortfalls. “
Some reverse mortgage professionals may dispute some of the specific terminology Harris uses to describe how the product works, but will likely be encouraged by the recognition of the improved reputation of reverse mortgages in recent years.
“Many financial experts have started to think about reverse mortgages strategically,” Harris writes. “A paid home is an asset, like a retirement portfolio. They consider that withdrawing money from the house is no different from spending a wallet. “
Harris offers a few scenarios in which a reverse mortgage can help a surviving spouse financially, including using the proceeds of a reverse mortgage to delay taking Social Security benefits until age 70; allow a portfolio to grow in a “bull market” instead of using it to pay for living expenses; reimburse costly services like long-term care or taxes triggered by Roth IRA conversions; or using the proceeds of a reverse mortgage to finance home renovations that can more easily age in place.
However, using such a product may not be universally optimal in all situations, Harris points out, echoing the sentiments of many other finance professionals who have put an asterisk on their descriptions of reverse mortgages.
“Most Americans have a significant portion of their wealth tied up in their homes,” Harris writes. “A reverse mortgage allows a widow to tap into that equity. However, a reverse mortgage is not a panacea. Careful consideration is essential before entering into a reverse mortgage deal.
Read the chapter extract homeless.