Reverse Mortgage – As a Financial Retirement Strategy
In the past, and still primarily today, the reverse mortgage (RM) is thought of outside our industry, as a loan of “last resort.” It was for those individuals who are “house rich and cash poor”. Unfortunately that mindset may be detrimental for many by preventing them from prolonging their more liquid investment assets for the length of their retirement. The perspective of the reverse mortgage is slowly changing for the better as a tool that can assist individuals in many ways with their retirement goals.
With the boomer generation upon us, turning 62 years of age, at a rate of 10,000 individuals a day and about 80% of them homeowners, wouldn’t it be advisable for them to include their home as part of their financial retirement strategy? For many it is their largest asset. If you are asked about your assets wouldn’t the home be part of that total picture? If so, let’s find out how the reverse mortgage can play a definitive role in financing your retirement.
Here are a few ideas for the new reverse mortgage:
• If you want to delay in taking out your Social Security till you reach full retirement age or even 70 1/2 years of age to maximize your monthly payment, then the RM can be arranged to assist with monthly funds during this time period until your Social Security is in place.
• Set up the RM as a Standby Line of Credit (LOC). In those years of retirement when your investment portfolio is not performing, use the RM LOC to fill the income gap in order to allow your investments time to recover. This will help prevent taking out a larger percentage of your portfolio when it is down. Also, can be beneficial by minimizing or eliminating those instances when a penalty for early withdrawal or capital gains tax consequence would occur from selling. I feel that most people would agree that having a Line of Credit is a good smart financial tool to have available for unexpected situations. It is even better when it is a RM LOC since it has a growth feature on the account and does not require any monthly mortgage repayment.
• Use the RM as a traditional loan but with the capability of creating a growing Line of Credit. What – how does that work? Let’s say you tried to refinance into a regular loan with a lower payment but didn’t qualify. With the RM let’s say we paid off your current loan balance of $250,000. You are not required to make payments, however you choose to do so and send in $1,000 per month to the servicer. When the payment is received your loan balance goes down $1,000 that particular day and $1,000 gets credited into a Line of Credit for future access. Remember this added benefit that the RM LOC grows at the same rate structure as the RM loan balance.
• Use it as a health or long term care insurance option. Initially set it up to pay for healthcare insurance premiums and coverage until you reach Medicare eligibility at age 65. When that occurs, you can leave the balance of your RM funds as a reserve for future years in case health issues arise in which you need home care.
• Sell your current older home and move into a newer residence (less maintenance or repair) in a more suitable location with modern amenities without paying all cash. Be able to save about 50% of the purchase price as funds to help finance your retirement lifestyle.
The Reverse Mortgage can do much more than what people think and know of this program. It offers tremendous flexibility along with some very unique features and benefits. Call me about your situation so we can discuss a tailor made financial solution to your retirement.