Inside Track

Four reasons to consider a reverse mortgage when you retire

From: Market Watch

Are you wondering how you’re going to come up with enough money to retire, especially considering the potential for major spending shocks such as nursing-home care?

If you’re a homeowner, taking a line of credit via a reverse mortgage just might be the answer, according to a new book by retirement-income researcher Wade Pfau.

In “The Retirement Researcher’s Guide to Reverse Mortgages,” Pfau offers a detailed analysis of the pros and cons of using these products as part of a comprehensive plan for generating income in retirement. (His book and this article focus on the reverse-mortgage program managed by the Housing and Urban Development Department; the loans are known as Home Equity Conversion Mortgages, or HECMs.)

Before delving into four reasons a reverse mortgage might be appealing now, here are a few things to keep in mind: With a HECM, the total amount you can borrow will depend on your home’s appraised value (calculated on the value up to $625,000 but no higher), the youngest borrower’s age (one borrower must be 62 years old but a spouse may be younger), the lender’s margin (a fixed rate) and prevailing interest rates.

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