If you own or have a significant amount of equity in your home and you are at least 62 years of age, you can now use that equity creatively to buy a second home as part of your investment strategy. Under the terms of a reverse mortgage, you can take a large part as a lump sum amount that can be used to buy a second winter or summer home. Now you can realize the benefits of a second home with very little or no out of pocket costs. In addition, your net worth could benefit from the combined of appreciating values of the second property and of your existing home (since the future appreciation of your home accrues to you as a part of a typical reverse mortgage agreement). Consider the following example:
Your existing home is valued at $300K. As part of a reverse mortgage let’s say that you take $175K as a lump sum to buy a condominium in St. George. The balance of the reverse mortgage ($125K) provides you with a monthly income that can be used for expenses, bills, investments, etc. As we noted, you are still the beneficiary of any appreciation that accrues to the value of your first home. In addition, your new $175K property is also appreciating! So effectively, the total property value appreciation you realize is being compounded while you enjoy the benefits of a second home for you and for your family.
It is no wonder that the popularity of reverse mortgages is increasing as a sound strategy for purchasing a second home and increasing the quality of life for home owners and their families.
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