Table of contents

→ What is debt consolidation?

→ What is a reverse mortgage?

→ What are the qualifications of a reverse mortgage?

→ How can a reverse mortgage be used to consolidate debt?

→ What are the benefits of using a reverse mortgage to consolidate debt?

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Taking on debt is a standard way of life in North America. From car loans to credit cards, it is estimated that 8 out of every 10 people have some kind of debt, and the average amount of consumer debt owing is nearly $40,000.

There is nothing wrong with taking on a reasonable level of debt to fund costlier purchases that need time to pay off, or to help manage through periods when funds are tight. But when our debt levels become too high, it can put us into financial trouble. When we are regularly spending more than what we earn, there may come a time when we can no longer make our minimum payments, pay our bills, or afford the necessities. This can lead to extreme stress and, in some cases, bankruptcy might seem like the only way out. However, all of this can be avoided with some sound financial planning and a debt consolidation strategy.

What is debt consolidation?

Debt consolidation is the act of taking out another loan to pay off all of your debt at once. This is an excellent choice for people who are weighed down by the burden of having multiple different debts with different lending institutions. By combining all of your debt into one single loan with a repayment schedule you can afford (or no repayment schedule at all), the burden of debt can become much more manageable. There are many types of loans that can be used to consolidate your debt, including both secured and unsecured loans. One excellent option to consolidate your debt load and ease your financial burden is a type of secured loan called a reverse mortgage.

What is a reverse mortgage?

A reverse mortgage is a great loan option, and the funds you receive from this loan can be used to pay for anything you wish. This particular type of loan could enable you to borrow up to 55% of the value of your home, and there is no monthly repayment plan. All of the borrowed funds are paid back to the lender once the home is sold, or when you pass away.

What are the qualifications of a reverse mortgage?

To qualify for a reverse mortgage, you must meet the following criteria:

• You must be over the age of 55
• You must own your own home
• You must have sufficient equity in your home to borrow against
• Your home must be your primary residence

How can a reverse mortgage be used to consolidate debt?

A reverse mortgage allows you to borrow from the equity in your home and gives you the advantage of not having to pay it back until you move out, or pass away. Since borrowers can access up to 55% of the total value of their homes, in most cases, the amount of money available can be quite sizeable. This loan can be used to pay for anything you wish. This means that it can easily be used to pay off debt that you have accumulated.

What are the benefits of using a reverse mortgage to consolidate debt?

There are so many benefits to obtaining a reverse mortgage, especially when it comes to consolidating debt. These benefits include:

• There are no monthly repayments required: A traditional loan requires paying back a minimum amount each month. A reverse mortgage does not require that any amount be paid back until you pass away, or no longer occupy your home as your principal residence.
• Obtain a substantial loan amount: A reverse mortgage allows you to borrow against the equity in your home and could provide you with up to 55% of your home value. The amount available could be substantial, especially compared with other unsecured loan types that you could have applied for.
• You can use your reverse mortgage loan for anything you wish: Once you are approved for a reverse mortgage, you can use those funds to pay for anything you want to. Once the reverse mortgage has paid out any existing debt, there could still be funds available to finance other items – like helping your children or grandchildren with a down payment.
• Qualification for a reverse mortgage is easy: Your income and credit score are not as important with reverse mortgages as they are for traditional mortgages or other types of debt. The mortgage amount is primarily determined by your age, the location of your home, and the condition of your home.
• A reverse mortgage is tax-free: The money that you receive from a reverse mortgage loan is entirely tax-free.
• A reverse mortgage is flexible: When you apply for a reverse mortgage, you can determine how you wish to be paid out this amount. You can access all the available funds upfront as a lump sum, or access it over time.
• A reverse mortgage allows you to stay in your own home: A reverse mortgage gives you the freedom to stay in your own home while being able to pay off any outstanding debt. Plus, it could provide you with extra money to enjoy your retirement and do all of the things you have always planned to do. 

Drowning in debt is no way to live. It can be highly stressful, especially if you are retired and don’t have a regular income source to pay it all off. Consolidating your debt is a great way to minimize your monthly payments, pay a lower interest rate and combine all of your sources of debt into one. If you are over the age of 55 and own your own home, a reverse mortgage is an excellent consideration for reducing your debt load. Reverse mortgages could give you the peace of mind of knowing that monthly payments and collections calls are a thing of the past. You have the right to live your retirement your way, stress-free.

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