This will be the last of three blogs. In this blog we are going to discuss the other retirement option, the reverse mortgage. As I mentioned before, my Mom and Dad owned the house above. They sold the home after the last of us (5 kids) moved out of the home in 1992.
While we kids did (and my Brother actually bought the house) had nostalgia for the house, my parents did not. However what where their options if they had? The most obvious choice in my mind is the reverse mortgage.
A reverse mortgage allows those of retirement age to cash in equity and stay in their home. At 65, they could borrow up to 55% of the homes value. We have established the value of the home to be $508,901 thus they could really borrow $279,896.55 in cash. The disbursement can be taken several ways, as a line of credit, cash out or disbursed over the term of the loan.
Let's say they took cash and invested it at 6%. This would be an annual rate of return of $16,793,76. Much like with a traditional mortgage they still own the home and the home can be paid off at anytime, including up to 12 months after they have vacated the home as a primary residence.
As we have seen there are several options making retirement much easier because of home ownership and at a 5.4 rate of return (even after the Great Recession), you are loosing money every day you wait!
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