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Reverse
mortgage information has recently improved in the financial world due
to the apparent success of regulations that were put in place in 2013.
The Reverse Mortgage Stabilization Act of 2013 has helped garner these
financial options some newfound respect in the industry.
Safeguarding
provisions established by the Act, such as a restriction on initial
borrowing amount, can help protect seniors from withdrawing all of their
equity from the very beginning of the loan by keeping approximately 40%
of the total equity on reserve for at least a year after the initial
disbursement. Seniors must also prove that they have the resources to
pay taxes and insurance during the program, or the bank can provide an
escrow option to guarantee the funds are available for such expenses.
Using an HECM Line of Credit to Generate Income
Financial
advisers recommend establishing a Home Equity Conversion Mortgage
(HECM) line of credit as a way to establish a financial cushion, even if
a senior doesn't need it right away. In certain cases, this makes more
sense than withdrawing a lump sum, since the HECM line of credit will
actually increase in cash value the longer it remains dormant.
Another
important part of reverse mortgage information that advisers recommend
is using the HECM line of credit tactic. This will help protect
retirement accounts from stock market fluctuations. This is possible
because HECM withdrawals are tax-free. When the market is less favorable
for drawing on investment accounts as a source of income. Seniors can
simply draw against their HECM line of credit. This way, when the
markets rebound, a senior's retirement accounts don't take much of a
hit. When investment portfolios bounce back, the line of credit can then
be repaid.
HECM
line of credit payments can also provide a solution for seniors looking
for a way to delay taking a hit on early social security payments. By
waiting to access social security funds until later in retirement,
retirees can ultimately expect an increase the payment amounts when they
are finally withdrawn.
Lump Sum: Paying Off a Forward Mortgage to Improve Cash Flow
Using
the lump-sum proceeds from a reverse mortgage to pay off a forward
mortgage is another strategy that financial planners recommend. This
tactic frees up cash flow for living expenses by eliminating what is
typically the largest household expense for many seniors.
However,
advisers don't recommend using the lump-sum payment as leverage for
taking on other debt such as a down payment for a big-ticket item or a
second home. This can lead to budget problems down the road. Not to
mention decreasing the senior's financial nest egg and overall borrowing
power. The goal is to use the reverse mortgage lump sum payment in a
conservative manner to decrease existing debt and free up cash flow.
Financial
planners are considering the new reverse mortgage information to be
promising due to the 2013 regulations having taken effect. These unique
loan options can be viewed as a fiscally responsible way for seniors to
put their money to good use for a comfortable and secure retirement.
To learn more about reverse mortgage information, Lake Oswego residents should visit http://www.reversenorthwest.com.
Article Source: http://EzineArticles.com/expert/Andrew_Stratton/83489
Article Source: http://EzineArticles.com/9385547
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