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Forbes: Inflation and stock market could lead more seniors to reverse mortgages

Steve Vernon describes how the current economy may be bringing more people into the fold of home equity lending, including reverse mortgages

Since many older Americans rely on a fixed income for living expenses and retirement investments may have also taken a hit due to declines in the stock and bond markets, something that has likely managed to rise for seniors is home equity. A reverse mortgage may be a path toward tapping it.

This is according to Steve Vernon, president of Rest-of-Life Communications and research scholar at the Stanford Center on Longevity in a new column published by Forbes.

“When it comes to tapping your home equity, there’s no ‘one-size-fits-all’ solution,” Vernon writes. “You’ll want to do your research to determine the method that could work best for you.”

Vernon goes on to list a few different methods of home equity extraction to serve as a tactic to make ends meet, and one of the methods he explores is a reverse mortgage.

“A reverse mortgage can be used in a variety of ways to help finance your retirement,” Vernon writes. “You can use a reverse mortgage to purchase a new home without a required monthly mortgage payment, provide money to finance enhancements to your current home, provide a line of credit to tap as needed for living expenses, or produce a stream of regular monthly cash flow.”

Repayment of the loan is not a requirement until the borrower leaves the home or passes away, he says, though most lenders allow payments to be made if a borrower desires, he explains. While this is a tactic that can be explored, Vernon also advises prospective borrowers to determine if it’s the right fit for them.

“There are many details you’ll want to investigate with a reverse mortgage, including their terms and costs,” he says. “You’ll also want to seriously think about any misconceptions you might have about this option.”

Determining the right product is key, Vernon says, and he goes on to mention Finance of America Reverse (FAR)’s hybrid forward-reverse mortgage product as an example of the options a borrower might seek out.

Vernon also describes other methods of home equity extraction a senior might be able to make use of including a Home Equity Line of Credit (HELOC), a shared equity investment product, the addition of an accessory dwelling unit (ADU) which can be rented out to create cash flow, or the choice to sell a current home and downsize into a smaller one while pocketing the rest of the initial sale’s proceeds.

Read the column at Forbes.

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