3 Ways to Utilize a Reverse Mortgage to Strengthen Your Financial Situation

Reverse mortgages can often be a misunderstood financial option for many consumers. One of the many reasons: since you must be 62 to obtain a reverse mortgage, consumers don’t get as much experience early on in their financial journeys as they would with credit cards or student loans.

Driving this point home, a recent WSFS Mortgage survey found that most respondents felt they had a better understanding of credit cards (65%), a traditional mortgage (61%), personal loans (60%), and a line of credit (51%) in comparison to reverse mortgages.

While a reverse mortgage may not be right for everyone’s unique financial situation, they can provide flexibility for those in or approaching retirement.

Here are three ways you can utilize a reverse mortgage to strengthen your financial situation.

Increase Cash Flow

The WSFS Mortgage survey found that most homeowners with knowledge of reverse mortgages agree they can provide needed cash flow (76%) in retirement.

Many retirees find themselves living on a fixed income, often made up of a combination of retirement savings, Social Security and more. For those who find their monthly finances are tight, a reverse mortgage could enable them to convert their equity in their home into a lump sum, monthly payments or even a line of credit to provide financial flexibility when it is needed.

By leveraging a reverse mortgage, eligible homeowners can eliminate the need for monthly mortgage payments, while also strengthening their cash flow without the need to dip into other savings. Just remember that you will still need to stay current on your taxes and insurance.

Upgrade Your Current House

Home renovations can be pricey, particularly for those who may already be on a fixed income.

For homeowners looking to make upgrades to their current home so they can age in place, a reverse mortgage can help provide needed funds without tapping into their other savings.

This could be a good option for homeowners who aren’t looking to make a move in retirement, but need to renovate bathrooms or other areas of their house to be more accessible and usable as they age.

Purchase Your Next Home

Many consumers find themselves looking to downsize their homes as they age, and their children leave the nest.

For homeowners wishing to downsize, move to a more desirable home to age in or to be closer to family, a reverse mortgage can provide an alternative to using a traditional mortgage for their new home purchase.

Homeowners looking to do so could sell their current home and use the money from the sale along with a reverse mortgage on their new house to enable them to complete the purchase without needing to make monthly mortgage payments.

Reverse mortgages can often seem like a complex topic, particularly because many consumers do not gain personal experience with them until they’re further along in their financial journeys.

There are many uses for reverse mortgages, but they’re not the solution for everyone. This is why it is important to work closely with your lender and financial advisor. If you think a reverse mortgage could be a fit for your needs, schedule an appointment with your lender and financial advisor, who can help evaluate your unique financial situation and answer any questions you may have.

Survey Methodology

The survey was conducted by research company Opinium. The sample included 750 homeowners ages 60+ nationwide. The online survey was conducted from February 16-21, 2024, with a margin of error of +/- 4%.