A Salve for Bear Markets - Old Peak Finance

A Salve for Bear Markets

February 29, 2016

reversemortgage

A Salve for Bear Markets

February 29, 2016

If you are in your 60s and don’t have a traditional mortgage, a reverse mortgage could make sense. The reason: you can use it as a line of credit to draw on in a bear market. That allows you to avoid selling stocks low if you need cash for retirement expenses.

First, a defintion. A reverse mortgage is available to homeowners 62 and older. You don’t make mortgage payments. Instead, the interest rolls up over time and is paid, along with the principal, when you sell or pass away. You can’t be forced out of your house, regardless of the home’s value or how long you live. Unlike a traditional line of credit, you can’t have your reverse mortgage line taken away as long as you pay your property tax and homeowners’ insurance.

Over the years, reverse mortgages developed a bad reputation. They deserved it, due to excessive fees. But fees and terms are now okay.

What makes reverse mortgages attractive is the flexibility they create. One of retirees’ biggest risks is an extended stock market decline. Young investors can wait out a down market. Retirees cannot, unless they have a significant amount in bonds or cash. A reverse mortgage credit line is a source of cash when markets are down, significantly increasing the probability that a retiree won’t run out of money.

This article is not intended to provide tax, legal, accounting, financial, or professional advice. Readers should seek advice from qualified professionals who can review their specific circumstances. Old Peak Finance endeavors to provide information that is accurate and current. However, we cannot guarantee that this information has not been outdated or otherwise rendered incorrect by new research, legislation, or other changes. Old Peak Finance has no liability or responsibility to any individual or entity with respect to losses or damages caused or alleged to be caused, directly or indirectly, by the information contained on this website.

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