As you may be aware, our great country is not currently seeing its best days. We live in perilous times and are facing tremendous challenges, both domestically and abroad. Our personal financial security is at risk as few times in our history, but a reverse mortgage can help you be prepared for whatever the economy throws at you.
Let’s explore the two most likely scenarios that may befall our country and the effect each will have on your financial security.
First Scenario: Depression
It’s no secret that the entire world has borrowed huge amounts of money. Both governments, including the USA, as well as its citizens have run up tremendous debts; much more, in some cases, than can ever be repaid. In the event of massive loan defaults, the supply of money collapses. Money will not be available to carry on everyday buying and selling. Commerce will grind to a halt and people will lose their jobs. They will find it difficult to buy things. As a result, prices will drop. This is especially true with real estate. It’s conceivable in such a scenario that housing prices could decline by as much as 50% or more. For most people, this would wipe out a huge portion of the equity in their most valuable asset.
A reverse mortgage would protect you against such a scenario. In the event of a depression, you will have benefited by using the equity in your home for a lifetime of income. Its payout is based on the current equity in your home in combination with your age and interest rate. You can protect the equity you have in your home today and not have to worry about a depression effecting you negatively.
Second Scenario: Inflation
There is a tremendous amount of money in circulation within the US economy. The government has printed huge amounts of money to pay for its many social programs. Unfortunately, it now faces a deficit of approximately $20 trillion. That amount exceeds the entire output (GDP) of the US economy for a single year. Some experts believe that this could lead to tremendous inflation; the kind you only read about in history books. In that case, the price of assets like your home will increase in value.
You may think you will now be stuck with your original reverse mortgage despite the fact that your home as risen in value. But that’s not the case. You can pay off your reverse mortgage at any time you want and take advantage of higher prices of homes by either selling or refinancing your home.
So, you see, you are protected either way; in the event of a depression you already have protected your equity and will receive a monthly payment as long as you live, and you can never lose your house to foreclosure due to an unpaid mortgage. On the other hand, if your house increases in value and you want to access your increased equity, simply pay off the balance of the reverse mortgage like you would with any type of mortgage and either sell or refinance your home. It really is a win-win situation.